How Does California FAIR Plan Insurance Work?

California FAIR Plan insurance is home insurance for homeowners unable to purchase coverage through traditional insurers due to their home's high risk of perils, like wildfire. FAIR Plan coverage is limited — the base policy covers only damages from fire, lightning, smoke and internal explosions. Additional coverage is offered but not to the same level as a standard home insurance policy. A 2021 press release by state Insurance Commissioner Lara points to FAIR Plan coverage expanding coverage options in the near future.

If you're struggling with buying home insurance, then the California FAIR Plan may be a potential coverage solution. We'll explain more in-depth how the FAIR Plan works, if you qualify and where to purchase a policy.

On This Page

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  Who's Eligible for California's FAIR plan?

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  How the California FAIR Plan Insurance Works

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  What the California FAIR Plan Covers

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  What the California FAIR Plan Does NOT Cover

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  How Much Does the California FAIR Plan Cost?

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  How To Apply for California's FAIR plan

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  California FAIR Plan FAQs

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  Shop Around Before Considering a FAIR Plan

Who's Eligible for California's FAIR plan?

The FAIR Plan is available to property owners (homeowners and landlords) with the following eligibility criteria:

• Owner-Occupied: One- to four-unit dwellings, where the owner occupies at least one of the units.

• Seasonal Rental: Residential properties that are rented out for less than one year.

• Rentals: One- to four-unit dwellings that you rent out to a tenant for at least one year.

Personal property coverage under the California FAIR Plan is also available to renters and condo owners.

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How the California FAIR Plan Insurance Works

In California, the FAIR Plan provides home insurance coverage for homeowners struggling to purchase insurance in the private marketplace. It is often called California Fair Plan fire insurance because many of their customers are denied private insurance due to their property's vulnerability to wildfires. This leaves some homeowners in high-risk areas vulnerable to property losses with none of the financial relief that a homeowners policy can offer.

If you're struggling with buying home insurance, then the California FAIR Plan may be a potential coverage solution.

The California FAIR Plan property insurance is meant to be a last-resort option. You should apply only if you're unable to find an insurance company in the traditional marketplace to accept your application. The FAIR Plan is intended as a temporary solution until homeowners qualify for a conventional insurance policy with a private insurer.

The FAIR Plan is not a government-funded agency and is not taxpayer-funded, like flood insurance policies offered through the Federal Emergency Management Agency (FEMA). Instead, member companies can join the network and the FAIR Plan issues policies on their behalf.

What the California FAIR Plan Covers

As a named peril policy, the FAIR Plan covers only the perils specifically listed in the policy. Coverage is quite limited — the base policy protects your home and personal property against losses from fires, lightning, smoke and internal explosions. Due to the limited covered perils, the California FAIR Plan is often called just basic fire insurance. More coverage is purchasable but still limited compared to a standard home insurance policy.

Covered perils

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FAIR plan customers are often denied private insurance due to their property's vulnerability to wildfires.

Note: Standard home insurance policies are open peril policies, not named peril policies, like the FAIR Plan. In an open peril policy, homeowners are insured against all losses except those excluded in the policy. All 16 of the perils listed above are covered in a standard home insurance policy but many are not in the FAIR plan.

Other coverage

California FAIR Plan customers may buy additional coverage options, including (but not limited to):

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What the California FAIR Plan Does NOT Cover

The FAIR Plan leaves several gaps in coverage that homeowners should be aware of. The base policy covers only three of 16 named perils and can only be increased to 10 perils if you purchase additional coverage. You will NOT  be able to purchase coverage for the following hazards and natural disasters:

• Theft

• Falling objects

• Weight if ice, snow or sleet

• Accidental discharge/overflow of water or steam

• Freezing

• Sudden accidental electrical surges

While some perils, like freezing, may not be high-priority for most California property owners, the lack of coverage for theft and falling objects (e.g., a tree branch falls on your roof) and more can be concerning.

California FAIR Plan does not offer liability coverage, either. Liability coverage typically applies when a guest suffers an injury or property damage while on your property or because of something on your property. Specifically, you lose out on three types of useful personal liability coverage:

• Personal liability: Pays for legal fees if somebody sues you because you are responsible for causing them bodily injury or damage to their property.

• Medical payments to others: Pays for medical payments of a guest whose injuries you are responsible for causing.

• Damage to property of others: Compensates the other party when you're responsible for damage to another person's property (e.g. a branch from an unmaintained tree on your lot falls on your neighbor's car or you accidentally drive into your neighbor's mailbox).

Additional living expenses are not available under a FAIR Plan. Additional living expenses coverage pays for living expenses, like hotel bills and meals, when you are displaced from your home. California FAIR Plan customers would need to pay for their own living arrangements if tragedy strikes.

A base policy protects your home and personal property against losses from fires, lightning, smoke and internal explosions.

Difference in conditions policies

The FAIR Plan acknowledges the limited scope of coverage they offer and encourages their customers to consider difference in conditions policies. Difference in Conditions (DIC) policies are companion policies meant to plug the holes in your coverage left exposed by a FAIR Plan. For instance, you could purchase a DIC policy for water damage, theft and liability coverage. Insurance for flood and earthquake damages are available through the National Flood Insurance Program and California Earthquake Authority, respectively. The California Department of Insurance provides a starting list for DIC policy providers.

Coverage is due to expand

Since more than 200,000 Californians are covered under the FAIR Plan policy, California Insurance Commissioner Lara is pushing for the FAIR Plan to expand their homeowners insurance coverage, according to a Sept. 2021 press release. Expanding the coverage under the FAIR Plan policy may help homeowners save money, reducing the need to supplement their coverage by buying multiple policies.

Although the FAIR Plan is marketed as a temporary insurance solution, these pushes are making FAIR Plan coverage more comparable to standard home insurance.

How Much Does the California FAIR Plan Cost?

Since California FAIR Plan prospective customers often have high-risk properties, they often see higher costs. The average cost of home insurance in California is $1,044.34 per year ($87.03 per month). FAIR Plan customers in California should expect to see rates around this ballpark figure and higher. Purchasing DIC policies to expand your coverage will further increase your overall home insurance costs.

FAIR Plan customers can choose a deductible ranging from $250 to $20,000. Your deductible is the cost you pay out-of-pocket before your insurance coverage kicks in. Generally, the higher your deductible, the lower your insurance premiums.

How To Apply for California's FAIR plan

A FAIR Plan can be bought with the help of an insurance broker. There are no options for purchasing coverage online, as you would with some private insurance companies, but you can receive a free quote.

Step one: Complete the FAIR Plan form to get in touch with a broker

The California FAIR Plan website requires that you complete a form before being contacted by a professional insurance broker registered with the FAIR Plan. There is no additional cost when using a FAIR Plan insurance broker.

Step two: Work with the broker to find an insurance policy

The broker will typically start by helping you to obtain coverage in the traditional insurance market. If the search turns out to be unsuccessful, the broker should walk you through the steps for buying a home policy through the FAIR Plan.

Step three: Explore your coverages

You can work with your broker to discuss your coverage options. The base policy for a FAIR Plan is limited in coverage. Your broker should help explain opportunities for expanding your coverage with DIC insurance policies before you finalize your purchase of a FAIR Plan policy.

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You can expand your FAIR plan coverage with DIC insurance policies.

Shop Around Before Considering a FAIR Plan

The California FAIR Plan policy is intended to be a last-resort home insurance option for those who are unable to buy insurance through conventional means. If you haven't shopped around yet, SmartFinancial can help streamline your search. After you answer a few questions, we analyze insurance carriers in your area to match you with a policy based on your coverage needs and budget. Enter your zip code below to start receiving free quotes.