Coverage guide

The California FAIR Plan

The FAIR Plan is the option people reach for when the ordinary market will not write them. It is a real insurance policy and it pays real claims, but it is deliberately narrower than a homeowners policy, and understanding the difference is the entire point of this page.

What it is

The California FAIR Plan Association is an insurance placement facility established under state law and made up of the insurers licensed to write property business in California. It exists to make basic property insurance available to owners who cannot obtain it in the ordinary market. It is not a state agency and it is not funded by taxpayers; it is an arrangement among the insurers themselves, overseen by the Department of Insurance.

It is intended as a safety net rather than a first stop. Applicants are generally expected to have tried the standard market first.

What the basic policy covers

The FAIR Plan's traditional dwelling policy is a named-peril fire policy. In broad terms it responds to fire, lightning, internal explosion, and — with the relevant extension — smoke and certain other perils. It does not attempt to reproduce the breadth of a homeowners form.

The things it has historically not included are the things people are most surprised by:

• Personal liability, if someone is injured on the property.
• Theft.
• Water damage from burst plumbing.
• Falling objects and a range of other perils a homeowners form treats as routine.

The Plan's coverage offerings and limits have been the subject of active regulatory attention in recent years and have changed over time, so the current terms should be read from the Plan's own current documents rather than assumed from any general description, including this one.

The difference in conditions policy

Because the basic policy is narrow, it is normally paired with a companion policy from a standard insurer, generally called a difference in conditions or DIC policy. The DIC fills the gaps: liability, theft, water damage and the other perils the FAIR Plan does not carry. Together the two are intended to approximate what a single homeowners policy would have provided.

This pairing is the part that goes wrong most often. An owner obtains FAIR Plan cover in a hurry after a non-renewal, satisfies the lender, and never arranges the companion policy. They then discover after a burst pipe, a burglary or an injury claim that they have no cover at all for it. If you are on the FAIR Plan, the first question to ask is whether a DIC policy is in force alongside it.

Practical notes

Coverage limits under the Plan are capped, which can matter on higher-value properties. Cover is written on the dwelling; contents and additional living expense are handled according to the Plan's current terms. Applications are made through a licensed broker or agent rather than directly by most consumers.

Being placed with the FAIR Plan is not permanent. Market appetite shifts, and mitigation work completed on the property can change how the standard market views it. It is worth re-testing the ordinary market periodically rather than settling in.

What to keep on file

Because the Plan and its companion policy are two separate contracts, the paperwork matters more than usual. Keep both declarations pages together, and read them side by side at least once so that you know which document answers which kind of loss. If a lender is involved, confirm that it has been given evidence of both rather than only the FAIR Plan certificate, since a lender satisfied by one may never ask about the other.

It is also worth writing down, in one line each, what the two policies do not cover between them. That short list is the honest picture of your exposure, and it is much easier to act on than a pair of forty-page contracts.

Mitigation is worth documenting

If you carry out defensible-space clearance, replace a roof, fit ember-resistant vents or box in eaves, photograph the work and keep the invoices. Evidence of mitigation is increasingly relevant both to what the standard market will consider and to how a property is rated, and reconstructing it from memory two years later is considerably harder than filing it at the time.

The California Department of Insurance maintains a page describing the FAIR Plan, its purpose and its regulatory position.

※Where this page comes from

• California Department of Insurance — California FAIR Plan