California FAIR Plan Insurance: What Is It and How Does it Work?

The California FAIR Plan is an insurance association that offers coverage to high-risk homeowners (usually in high risk areas for fires) and renters in the State who have trouble obtaining coverage through another insurer.

Update: The California Insurance Commission ordered the FAIR Plan to start including coverage for non-fire risks by June 1st and to double coverage limits by April 1, 2020.

Currently, the coverage in FAIR policies is limited to a few perils such as fire and smoke, which means you need to buy a second insurance policy for other risks like wind damage and liability. However, recent changes mean that FAIR plans purchased in June 2020 and onward may offer comprehensive home insurance.

You can apply for California FAIR insurance through United Agencies free of charge. Contact us for assistance.

Eligibility, Coverage and Cost

In order to purchase home insurance through the California FAIR Plan, you must own property in the state and meet certain building requirements. Although applicants are encouraged to “make a diligent search of the voluntary market” before requesting a FAIR Plain, there’s no requirement to submit proof that you’ve been rejected for coverage by private insurers.

It is recommend that you turn to a private insurer before attempting to obtain a FAIR Plan policy directly. Compared to private market home insurance policies, the current version of California’s FAIR Plan insurance covers fewer perils and features lower coverage limits. For example, current FAIR Plain policies don’t offer personal liability coverage or replacement cost dwelling coverage.

According to the California FAIR Plan website, the program will not cover:

Long-term vacant or unoccupied homes. If more than 50% your home’s building area has been vacant or unoccupied for at least one year, you won’t qualify for a new fire insurance policy or renewal through the FAIR Plan. And if your house is currently substantially vacant or unoccupied for less than a year, it will need to be in good condition with secured doors and windows in order to obtain coverage.

Houses with existing damage that is not being repaired. If your house is damaged, it won’t qualify for coverage unless you can submit a repair contract that outlines the work that will be done to fix the damage, along with an estimated completion date. This needs to be signed by you and a licensed independent contractor. If you have yet to hire one, you will need to do so before applying for coverage.

Properties used for illegal purposes. If illegal activity is taking place on your property, it won’t qualify for California’s FAIR home insurance. For instance, growing marijuana in your house would violate federal law and disqualify it from FAIR Plan coverage.

What Does the FAIR Plan Cover?

The California FAIR Plan offers home insurance, renters insurance and condo insurance policies, though condo owners and renters only qualify for coverage of their personal property, not the dwelling itself. Also called fire insurance, the FAIR homeowners insurance policy extends actual cash value coverage to your house and personal property. You can also choose to purchase replacement cost coverage for your dwelling and personal property, which increases your payout in the event of a claim since depreciation won’t be considered in the value of an item. Some other coverages that can be added to your California FAIR policy include:

• Other Structures: If you have a shed, separate garage or other structures on your property, you can add supplemental coverage for them.
• Fair Rental Value Coverage: Provides compensation if your house is damaged to the point that it can’t be occupied.
• Building Code Upgrade Coverage: Building code upgrade coverage, also called ordinance and law coverage, will provide up to 10% of your dwelling coverage to cover any additional repairs or improvements required to get your home up to code. This can be particularly valuable if you own an older home that is significantly damaged, as you may need to upgrade its electrical or plumbing to comply with California requirements.
• Earthquake Insurance: Coverage is provided by the California Earthquake Authority (CEA), so it can also be purchased separately.
• Debris Removal: If a covered peril causes debris to be brought onto your property, this coverage would pay for its removal.
• Inflation Guard: Increases your dwelling coverage limit, and building code upgrade coverage limit if you’ve purchased this, to reflect changes in the cost of construction due to inflation as estimated by a third party. Note, though, that the increased coverage will mean an increased premium for fire insurance.
• Plants, Shrubs and Trees: Up to $250 of coverage per plant, shrub or tree.

Currently, homeowners can obtain a maximum of $1.5 million of California FAIR coverage, which is a combined limit across all the forms of coverage you choose. However, the California Insurance Commissioner recently ordered the FAIR Plan to double this limit to $3 million by April 1, 2020.

With regards to your home insurance deductible, FAIR offers options that range from $100 to $10,000. A higher deductible will cause you to pay lower premiums for a policy, but we recommend you only consider deductibles that you are certain you’d be able to pay out of pocket in the event of an emergency when you may have other pressing expenses.

What Perils Are Covered by the California FAIR Plan?

FAIR Plan property insurance policies are “named peril” policies, meaning that only the causes of damage specified in your contract will be covered. The current version of California FAIR policies include coverage for only the following:

• Fire
• Lightning
• Internal explosion
• Smoke
• Vandalism or malicious mischief (optional coverage that can be added so long as your house has not been vacant or unoccupied for more than a month)
• Windstorms, hail, explosion, riots and civil commotion, aircraft, vehicular damage, volcanic eruptions (optional coverage that will increase your premium to add)

Recent instructions from the state’s insurance commissioner have directed the FAIR Plan to begin offering comprehensive homeowner policies by June 1, 2020. These comprehensive options would allow you to get coverage for all homeowner risks in one policy, not just coverage for the named perils above.

Until then, our recommendation remains the same: If you decide to purchase a California FAIR policy, you should also look for a “difference in conditions” policy. These are supplemental home insurance policies that extend your limits for covered perils or provide coverage for additional common situations. For instance, water damage is one of the most common home insurance claim causes, so you may want to buy a difference in conditions policy that includes this peril.

How to Get a California FAIR Quote and Payment Options

To get a California FAIR plan fire insurance quote, you can apply through United Agencies. The benefits of using us is that you’ll be able to receive an immediate quote, and the representative can assist you with determining your property insurance coverage needs.  We can also provide quotes for insurance policies through Standard Carriers, which currently offer broader coverage.

Since the FAIR Plan won’t provide feedback on how well you’ve estimated the costs to rebuild your property if damaged or the value of your property, we will be valuable in giving you advice on these questions. In addition, we can help you to make sure all documents have been completed accurately and no pieces of your application are missing.

In some cases, to complete an application, your property will be inspected for risks, such as rating your potential for a wildfire, as this will impact your premium. Based on the inspection, you may be required to make safety improvements, such as installing fire extinguishers or clearing brush from your property.

Once you’ve been issued a quote, you’ll have 60 days to submit a payment to the California FAIR Plan, and your policy will go into effect once the payment has been received. Payments for California FAIR Plan insurance can be made by direct deposit from a checking or savings account (ACH payment), cash, check or money order. You cannot pay for coverage with a credit card.​

Contact a United Agencies rep today for assistance. Our staff is happy to be of service.