FAIR Plan insurance guide: What it is and how it works

Homeowners insurance is essential financial protection for anyone who owns their home. But finding coverage can be difficult if the insurance company thinks your home is at heightened risk of damage or loss. In fact, you can often be denied homeowners insurance because of your home’s location, physical condition, and claims history.

If you’re having a difficult time obtaining coverage or your insurance was recently canceled due to your home’s risk, consider applying for your state’s Fair Access to Insurance Requirements (FAIR) Plan. While they’re generally more expensive and have limited protection compared to normal homeowners insurance, FAIR Plans are a good last-resort option for homes that don’t qualify for a standard policy.

What is a FAIR Plan?

A FAIR Plan is the type of homeowners insurance you get when you’re not able to find coverage through a typical insurance company. These policies are often necessary in natural disaster-prone areas where homeowners insurance is hard to come by. 

While these plans are instituted at the state level, they’re financially backed by all private insurers licensed to write insurance in that state. Each of these companies shares in FAIR Plan profits, losses, and expenses at an amount proportional to its market share in the state. This allows multiple insurance companies to share the risk of the most high-risk homes, rather than just one company. 

What does FAIR Plan insurance cover?

FAIR Plan coverage typically varies from state to state. In some states, FAIR Plans come with dwelling coverage and nothing else. Coverage for your personal belongings and additional structures on your property are usually only offered as optional policy add-ons, and loss of use and personal liability coverages generally aren’t even optional.

But in other states, like Texas and New Jersey, FAIR Plan coverage more closely resembles a standard homeowners insurance policy. And in the Golden State, the California FAIR Plan is now required to include a homeowners insurance policy in addition to its standard dwelling fire offering. [1]

Here’s a look at the coverages provided by a Texas FAIR Plan policy:

When is a home considered high risk?

A home is often considered high risk when it has any of the following characteristics:

• It’s located in an area prone to severe weather or natural disasters, like wildfires, hurricanes, windstorms, or tornadoes.

• It has old plumbing, outdated electrical wiring, a bad roof, or other characteristics that make it ineligible for coverage. 

• It has a lengthy loss history, meaning several insurance claims have been filed at the residence in the past.  

What to do if you’re denied homeowners insurance

If you’re getting denied homeowners insurance on the standard market, you’re likely considering what other options you have. But before applying for a FAIR Plan, do the following:

Talk to the insurance company

In the event your homeowners insurance is canceled or you’re denied coverage because your home is too high risk, reach out to the insurance company and ask for the reason for denial. Is it because of the home’s location, or is it because of its physical condition? The insurer may provide you with a list of fixes or upgrades that can make your home more insurable.

Talk to your neighbors

Chat with people in your area and ask who they are insured with. If an insurance company is willing to insure the house down the street from you, then they will likely be able to insure your home, too.

Check your state’s department of insurance

In addition to offering FAIR Plans, states also have departments that both regulate property insurance and provide educational resources about how to get insurance on the private market.

Check your state’s website, or call your state’s insurance department to get a list of private insurers who provide homeowners insurance in your area.

Are you eligible for a FAIR Plan?

If you’ve exhausted every option on the private market, your best option is your state’s FAIR Plan. While the process is fairly different in every state, you’ll likely need to meet the following eligibility criteria:

• Proof that you were denied coverage from at least two insurers on the voluntary market — sometimes more. In New York, for example, you need proof that you were rejected by at least three insurance companies.

• You may be required to make improvements or update your home to comply with local building codes, such as upgrading electrical work from aluminum to nonmetallic or copper.

• The property doesn’t have any outstanding tax liens against it.

• There aren’t any open insurance claims against the house.

Once you’re ready to apply for a FAIR Plan, contact your state’s insurance department to find out next steps. You’ll likely be directed to an insurance agent who will help you fill out your FAIR Plan application.

Where to find FAIR Plan insurance in each state

FAIR Plan insurance — by the numbers

FAIR Plan insurance policies have become more and more popular over the past decade as climate change continues to impact homeowners’ risks of wildfires, tornadoes, hurricanes, and other natural disasters.

• 34 states and Washington, D.C. offer some type of FAIR Plan coverage for high-risk homeowners

• Less than 3% of California homeowners had insurance through the state’s FAIR Plan in 2020 [2]

• The number of homeowners in Texas who received insurance through the state’s FAIR Plan decreased by 7% in 2021 [3]

• 5% of Florida homeowners had insurance through the state’s FAIR Plan sold through Citizen’s Insurance in 2019 — and that number is only expected to rise [4]