California Fair Plan Explained
As you are reading this, it is safe to believe that that you are researching details on the CA Fair Plan. Common reasons are a non-renewal from your current insurance company, or you are buying a new home and are finding it difficult to find insurance.
There can be a great deal of frustration and anxiety about being required to purchase the CA Fair Plan.
The reason why is simple, your home is in a location known as a high fire-line risk area.
Below, we will explain details about the CA Fair Plan and best practices working with their coverage.
What is the California FAIR Plan?
The California FAIR Plan is an insurance plan of last resort for residential homes, commercial property, and businesses that were denied coverage in the traditional market. The California FAIR Plan is a private association of all licensed property insurers in California. It is not a state agency funded with taxpayers or public money. Every private insurer that provides property insurance in California is required to participate in the FAIR Plan.
Why is the California FAIR Plan Important?
The California FAIR Plan was established in 1968 to help people who cannot obtain standard renters or home insurance after being “redlined” — denied home insurance because their area is too risky. “FAIR” means “fair access to insurance requirements,” saying it is available to all Californians that meet specific requirements.
After catastrophic wildfires swept across California in 2017 and 2018, state insurers were hit with record-breaking losses of over $25 billion. With three million acres burned and over 30,000 structures destroyed, the two years were the deadliest and most destructive wildfire seasons that the state has ever seen. In 2018, the number of non-renewals on homeowners insurance policies rose by more than 10% in seven counties across the state, and state insurance carriers paid out to insurers $1.70 for every $1 in premium collected. The situation continues to prove challenging today as those who have lost their homes, and the state regulators, utilities, and insurers charged with serving and protecting them, scramble to find solutions.
Who Can Buy California FAIR Plan Insurance?
The California FAIR Plan is available to all Californians who meet the following requirements:
Unable to Obtain Insurance Through the Voluntary Private Insurance Market
Once you have be non-renewed or not accepted for a traditional policy, you may then apply for a CA Fair Plan. Property types accepted are extensive.
This includes:
- Homeowners of primary and seasonal homes
- Landlords
- Personal Property for Renters
- Personal Property and Additions, Improvements, and Alterations for Condo and Coop Owners
- Townhouse Owners
- Mobile Home Owners
- Commercial Businesses
Will the California FAIR Plan inspect your home?
Yes, they will.
While traditional or private insurance companies typically look for the quality of the home and “pride in ownership”, the California Fair Plan takes a slightly different approach. They will still review the quality and pride of ownership in you home, but they want to review any fire retardant materials claim to have be used during the application. Mostly, they will be looking to see the fire risks presented around your home. Some common modifications they may require are:
- Removal of branches that extend over your home
- This may even include them instructing you to cut down a tree
- Clearing dead or wild brush within 100 ft. of your home
How Does the California FAIR Plan Work?
Homeowners insurance (also known as Fire insurance) provides coverage for loss or damage to a structure as a result of a peril. A peril is used to describe the cause of the damage, examples include fire, earthquake, vandalism, and so on. The policy pays the policyholder back (less the deductible) on either a replacement-cost basis or an actual cash value (depreciated) basis for damages.
The California FAIR Plan is a simple policy that covers losses to your dwelling and personal property caused by only these four perils.
- Fire (both internal (i.e. kitchen fire) and external (i.e. wildfire)
- Smoke
- Lightning, including damage from wildfire and brush fires in California
- Internal Explosions
For an additional premium, you can purchase optional coverage for these other perils:
- Explosions
- Windstorm or hail
- Vandalism or malicious mischief, riots or civil commotion
Items Covered by the California Fair Plan
Dwelling (Coverage A). Covers your home’s structure. As of January 1st, 2021, California Fair Plan is offering a 25% extended replacement cost option.
Ordinance or Law. Ordinance or Law coverage pays for extra construction costs needed to bring the house up to required residential building codes. As of July 1, 2021 the state of California requires all insurance policies, excluding manufactured homes, to have at least 10% of your dwelling amount, coverage A included.
Other Structures (Coverage B). Other structures include detached garages, swimming pools, detached solar panels, sheds, fences, etc. There is no minimum or maximum value you may purchase. Please note that if your home does not have any separate structures, you are NOT required to buy this option.
Personal Property (Coverage C). Covers personal belongings of the resident. While actual cash value basis, which deducts depreciation is an option, California Fair Plan offers replacement cost at no extra charge.
Fair Rental Value (Coverage D). Offer owners and renters up to 10% of your dwelling limit (coverage A) for you to live elsewhere while your home gets repaired.
Debris Removal. Covers the cost of removing all debris from the location in preparation to build your new home. Maximum purchasable amount is 5% of Dwelling (Coverage A)
Trees, Plants, and Shrubs. Up to $250 per tree, plant, and shrub, plus landscaping.
Outdoor TV Equipment and Radios, Signs, and Awnings.
Coverage limit: You may purchase coverage for up to $3 million of all combined coverages for one location.
Deductibles: Deductibles are applied once per incident and include dollar amounts $100, $250, $500, $1,000, $2,500, $5,000, $7,500, and $10,000.
Homes with roofs less than 25 years old qualify for replacement cost value. RCV is not available for mobile or manufactured homes. If your policy includes RCV coverage, it must have Inflation Guard coverage too, except when the dwelling and personal property limits combined total $3 million.
- If you have RCV, it pays it will pay the full value for your home when you have a total loss.
- If you have ACV, it pays fair market value for your home when you have a total loss. If you have a partial loss, ACV pays replacement cost minus depreciation.
What Does the California FAIR Plan Exclude?
As CA Fair Plan provides all fire-related insurance to consumers who have been turned down by traditional insurance companies due to high-wildfire risks. As a result, it excludes most of the traditional Homeowners coverage. CA Fair Plan does not offer the following with their policies:
- Theft
- Floods
- Water Damage unless a covered fire or explosion directly causes it.
- Service Lines
- Earthquake
- Liability. Personal liability, medical payments for others, and damage to other people’s property.
We strongly recommend that you purchase a Difference in Conditions (DIC) policy, or Wrap. A DIC is a policy used to fill in the insurance gaps left by the FAIR Plan. We will work with you to assist you in determining what additional coverage you need.
Essentially, the combination of a California FAIR Plan and DIC is equivalent to a standard homeowners policy.
California FAIR Plan Insurance Claims?
- file a claim online
- file a claim via the phone: 1-213-487-0111