The California FAIR Plan (Fair Access to Insurance Requirements) is a crucial safety net for property owners in California who struggle to find insurance coverage through traditional means. Established in 1968, the FAIR Plan was created in response to the riots and brush fires of the 1960s, which left many property owners without adequate insurance options. This plan ensures that all Californians have access to basic property insurance, particularly those in high-risk areas prone to wildfires and other natural disasters.
Ownership and Structure
You might be surprised to learn that the California FAIR Plan is not a state agency or a public entity. Instead, it is a syndicated fire insurance pool comprised of all insurers licensed to conduct property/casualty business in California. These insurers are required by law to participate in the FAIR Plan, sharing in its profits, losses, and expenses based on their market share of business written in the state1. The plan is regulated by the California Department of Insurance and operates under the oversight of the California Insurance Commissioner.
Coverage and Limitations
The FAIR Plan provides basic property insurance coverage, primarily focusing on fire and related perils. Here are some key aspects of what is covered and the limitations:
There are the Covered Perils:
Fire
Smoke
Internal explosions
Lightning
Here are Additional Coverage Options:
Windstorms
Hail
Vehicle damage (through endorsements)
Now here are the Exclusions:
Personal liability
Theft
Water damage (e.g., plumbing issues, burst pipes)
Earthquake damage (must be purchased separately through the California Earthquake Authority)
Flooding – meaning any water intrusion into the home not just an actual river flood. Dishwasher breaks and floods the house, internal pipe breaks, gutters overflow and create leaks inside the walls etc….(requires a separate policy through the National Flood Insurance Program or private insurers)
Here are the Coverage Limits:
The FAIR Plan has caps on the maximum coverage amounts it provides, which may not be sufficient for higher-value properties.
Homeowners may need to purchase supplemental policies, such as a Difference in Conditions (DIC) plan, to cover gaps in coverage.
Due to the high-risk nature of the properties covered, premiums for FAIR Plan policies tend to be higher than those for standard homeowners insurance. While it provides essential coverage for specific perils, it is important for homeowners to be aware of its limitations and consider supplemental policies to ensure comprehensive protection.
Source: Wikipedia
