California FAIR plan: What is it, and what does it cover?

What is the California FAIR Plan? 

The California Fair Access to Insurance Requirements (FAIR) Plan was developed in 1968 in response to traditional insurance being more challenging to access. It was created as a safety net for property owners who can’t get conventional insurance. 

Due to increased regulations and natural disasters, particularly wildfires, many conventional insurance companies offer fewer policies or no coverage in California.

With fewer traditional insurers offering coverage, more people are turning to the FAIR plan to meet lender insurance requirements and carry a minimum amount of coverage. However, the FAIR Plan only offers fire coverage and doesn’t include standard homeowners insurance coverages, such as liability. Additionally, property owners must show that they’ve been turned down for traditional insurance multiple times to qualify for the program.

California requires all insurance companies licensed in the state to participate, but the government does not run the program. Instead, the insurance companies write the policies and are responsible for any expenses, such as claims. 

With the withdrawal of insurers with large market shares, FAIR Plan policies have grown substantially. They increased by over 11% from September to December 2024 and by 115% since September 2021.

This increase is concerning since the FAIR Plan may become overburdened. The program is meant to be a safety net, but unfortunately, many homeowners have no choice since so many insurers have left the state.

While policy premiums typically cover claims costs, a massive disaster can pose problems. For example, the FAIR Plan covers around 22% of the structures in the Pacific Palisades Fire area and 12% in the Eaton Fire area. The FAIR Plan has received almost 4,000 claims from these fires alone, highlighting the potential strain on the program in the face of large-scale disasters.

How does the California FAIR Plan work?

The California FAIR Plan is meant to offer homeowners last-resort insurance coverage. It’s not intended to provide traditional coverage to every property owner but to offer a small amount of fire coverage to people who can’t find traditional coverage.

The FAIR Plan covers damages from fire, lighting, smoke and internal explosions. It doesn’t cover other damages; property owners must add coverage to be more fully protected.

Since all insurers in California must write FAIR Plan policies, no one company pays for damages. Instead, claims costs are spread out among all of the insurers.

“The California FAIR Plan is intended to provide the last option for coverage when it is unavailable to consumers on the traditional market. The FAIR Plan is not intended to compete with or replace insurers in the traditional market,” said Hilary McLean, CEO of Alza Strategies, a public affairs strategy group. “All customers are encouraged to work with a licensed, independent insurance broker to find insurance options that best meet their needs. Insurance brokers may be able to help Californians access property insurance other than through the FAIR Plan.” 

To qualify for coverage, you must show that you’ve tried multiple times to find a conventional California homeowners insurance policy and haven’t acquired coverage. It should be noted that coverage is minimal, but rates tend to be much more expensive than a more robust traditional policy.

What does the California FAIR Plan cover?

The FAIR Plan covers damages from fire, lightning, smoke, and internal explosions. 

It does not provide personal liability or other coverages included in a standard home insurance policy, but some options can be added to the policy. For example, homeowners can add a Difference in Conditions policy, filling in the FAIR Plan policy's gaps, including coverages like liability, flood, and theft.

California homeowners may also consider adding earthquake coverage offered by the California Earthquake Authority as a standalone policy.

How much is California FAIR Plan insurance?

As with a typical homeowners insurance policy, the cost of a FAIR plan policy varies. Factors used to determine rates include the age of the home, location, price, and recent claims. The coverage you chose also affects the premium. While a bare-bones policy is cheaper, adding coverages such as flood, liability or earthquake insurance offers more protection at a higher price.

Who qualifies for California’s FAIR Plan?

In order to qualify for the FAIR Plan, you must show multiple attempts at getting traditional homeowners insurance. This coverage is only for homeowners who cannot acquire conventional insurance and only offers fire coverage. 

Additionally, the plan only covers certain types of property. Properties can be owner-occupied, rentals, seasonal or condos. Renters can also qualify for coverage.

California FAIR Plan coverage limits

Like a conventional homeowner insurance policy, the FAIR Plan has specified limits. 

The policy limit for a residential property is $3 million, and the limit for a commercial property is $20 million. It’s important to note that the value of the land is not included in those limits, as insurance doesn’t cover land value.

How to get a California FAIR Plan policy

You can apply for a FAIR Plan policy if you've exhausted all other options. However, you must meet specific qualifications and go through steps to acquire coverage.

Steps to getting a FAIR Plan policy include:

• Find a broker. The California FAIR Plan website lists agents in your area who can help you obtain a policy.
• See if you’re eligible for coverage. Your broker will first look for a traditional insurance policy, then make sure you can get a FAIR Plan policy if no other coverage is available. Your property must also meet specific qualifications. The FAIR Plan covers homes, condos, rental properties, seasonal properties, and renters.
• Choose coverage. While the FAIR Plan offers basic fire coverage, you may add coverage, such as liability, flood or earthquake insurance.
• Schedule an inspection. As with a traditional homeowners insurance policy, a home inspection may be required. Any problems found by the inspector would need to be remedied before the policy goes into effect.
• Make a payment. You can pay in full, break the premium into three monthly installments, or pay monthly. You can make a payment through the FAIR Plan payment portal.

California FAIR Plan payment options 

The FAIR Plan offers three payment options. Homeowners can:

• Pay for coverage in one payment
• Pay in three installments
• Pay monthly. However, if the policy went into effect after 4/1/24, there is an installment fee of $4.50 per payment.

Homeowners can make payments through a portal from the FAIR Plan website.

Helpful home insurance tools and calculators

• Home insurance calculator
• Condo insurance calculator
• Renters insurance calculator
• When to file a home insurance claim