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

What is the California FAIR Plan?

The California FAIR Plan is last-resort fire insurance for homeowners who can’t get standard home insurance in California. It covers limited fire-related damage, but it does not replace a full homeowners policy. You use it to meet basic coverage needs while continuing to look for traditional insurance.

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 provides basic coverage when standard insurers turn you down. The plan covers limited fire-related losses, and all licensed California insurers share the risk. It is designed as a temporary backup, not a long-term replacement for regular homeowners insurance.

The FAIR Plan covers damages from fire, lightning, 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 include major standard coverages like personal liability, flood or earthquake insurance. To get broader protection, you need added policies, such as a Difference in Conditions policy or separate earthquake coverage.

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.

PEOPLE ASK

Is the California FAIR Plan good insurance?

The California FAIR Plan isn’t a good replacement for a standard home insurance policy. However, it meets lender insurance requirements and provides some coverage for damage to your home.

How much is California FAIR Plan insurance?

California FAIR Plan insurance costs more than a standard homeowners policy while offering less coverage. Your premium depends on your home’s age, location, value, claims history and selected coverage. Adding protection for liability, flood or earthquake increases the cost, but it also reduces major gaps in coverage.

Who qualifies for California’s FAIR Plan?

You qualify for the California FAIR Plan if you cannot get traditional homeowners insurance after multiple attempts. The plan is available for eligible homes, condos, rentals, seasonal properties and renters. You must show that standard insurers have turned you down before using the FAIR Plan as a backup option.

California FAIR Plan coverage limits

The California FAIR Plan has coverage limits of $3 million for residential properties and $20 million for commercial properties. These limits apply to the insured structure, not the land. You need to carefully review your property value and coverage needs, as the plan does not work like a full homeowners policy.

How to get a California FAIR Plan policy

To get a California FAIR Plan policy, work with a broker, confirm you cannot get standard insurance, choose your coverage, complete any required inspection and make your payment. A broker helps check for other insurance options first, since the FAIR Plan is meant for property owners who have exhausted their options in the traditional market.

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.

PEOPLE ASK

What happens if I find regular home insurance after getting a FAIR Plan?

If you’re able to secure regular home insurance, you can cancel the FAIR plan and receive a refund if you’ve paid in advance. Make sure that your new policy goes into effect before canceling your FAIR Plan to ensure you don’t have a lapse in coverage.

California FAIR Plan payment options

The California FAIR Plan offers three flexible payment options through its online portal. Homeowners can choose to pay their premium in full, divide the cost into three installments, or make monthly payments, though policies effective after April 1, 2024, incur a $4.50 installment fee.

The payment options are:

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.

FAQ: California FAIR Plan

Is the California FAIR Plan expensive?

Yes, the FAIR Plan is more expensive than a traditional homeowners insurance policy and offers less coverage. Actual costs vary by homeowner and depend on factors like the age of your home, location, recent homeowners insurance claims and coverages chosen.

What does the California FAIR Plan not cover?

The California FAIR Plan doesn’t offer traditional home insurance coverage, only fire insurance, which covers damages from fire, smoke, and internal explosions. Homeowners may be able to add coverage for additional premiums.

Additionally, the FAIR Plan doesn’t include earthquake, flood or liability coverage.

Can I get liability coverage through the California FAIR Plan?

The California FAIR Plan doesn’t offer liability coverage. However, you may be able to get liability and other coverages added to your plan with a Difference in Conditions policy.

Why would I need a supplemental Difference in Conditions policy?

You can use a Difference in Conditions policy to fill the biggest gaps in your California FAIR Plan policy. Since the FAIR Plan mainly covers fire-related damage, this supplemental policy can add protections such as liability, theft and other coverages, making your insurance closer to a standard homeowners policy.