We’re just two months into the new year and 145 wildfires have already rolled through California.1 On the bright side, the state has also seen a ton of late winter rain. That must be a good sign, right?
According to scientists, not really. It means the Golden State is going to see a lot of new forest growth. That’s a very good thing — but in drier months to come it could unfortunately become tinder for the raging fires that have terrorized California for years.
It seems homeowners just can’t win in California. We’ve written extensively about how the wildfire situation in California affects homeowners, sticking them between a rock and hard place when it’s time to shop for an affordable home insurance policy. Despite the California Insurance Commissioner’s ongoing struggles to secure reasonable insurance options for Californians in wildfire-prone areas, many California homeowners at risk of catastrophic fire damage are getting dumped by their insurance providers and need to consider other options.
One of those home insurance options is California’s FAIR Plan. In this homeowners guide, we’ll take a closer look at:
- What the California FAIR Plan is.
- How the FAIR Plan covers Californians in wildfire-prone zones.
- If FAIR Plan insurance is a good option for residents of California with property at serious risk of fire damage.
FYI: California saw plenty of rain in the winter of 2020, followed by severe drought when the moisture dried up. The combination led to the worst wildfire year in recorded history, with 4 million acres burned.2
What Is the California FAIR Plan?
The California Fair Access to Insurance Requirements (FAIR) Plan hit the scene in 1968 as a stop-gap measure to cover Californians in fire-prone areas who couldn’t get traditional insurance providers to cover them. It still exists today.
The way California FAIR Plan coverage works is a little different than typical HO-3 homeowners policies, where you’re dealing with a single underwriter. You still choose your insurer with a FAIR Plan, but the companies participating in the plan pool premiums and split the risk when it’s time to pay out. Any licensed insurer in California can become a member.
Mandatory coverage for people living in fire-prone zones sounds pretty wonderful on paper, but if you’re the owner of a FAIR policy in California, you may see things a little differently.
Did You Know? What do Etna, Imperial, and Monte Sereno have in common? They’re the three safest cities in the Golden State, according to our guide to the safest cities in California.
What the California FAIR Plan Really Covers
The California FAIR Plan covers property owners for fire, smoke, and lightning damage, and for explosions on their property. It doesn’t matter what kind of property you have — home, condo, or business. It could even be a house you rent out or use seasonally.
Like any quality homeowners policy you purchase on the open market, FAIR policies guarantee the following basic coverage:
- Dwelling (i.e., your property and any buildings on your property)
- Personal liability (i.e., anyone injured on your property)
- Temporary living expenses (i.e., what you pay out of pocket for food, gas, and lodging until you get back on your feet)
Extra Tip: Renters are eligible for FAIR Plan coverage, too, and you probably want to consider it. As we point out in our renters insurance guide, landlords are only insured for damage to their buildings, not for damage to your stuff.
The Problem With FAIR Insurance
If you’re a California homeowner, chances are my description above has already raised at least one red flag. Fire, smoke, and lightning damage? What about theft, vandalism, storms, floods, and earthquakes?
That’s the first issue with FAIR Plan coverage. FAIR insurance covers you only for fire-related damage, which means you’ll have to purchase additional coverage to round out your policy. That’s a major drawback the California Insurance Commissioner is reportedly trying to fix.
In addition to a whittled-down policy, you may notice that your California FAIR Plan insurance doesn’t cover the full cost of a rebuild. See our homeowners guide to dwelling coverage for a full explanation.
The second big downside to a FAIR Plan policy is the cost. FAIR insurers can’t send you packing, but they aren’t providing this service out of the kindness of their hearts. They’re taking on a lot of risk, and they charge you accordingly. Simply put: You may pay through the nose for your FAIR policy.
FAIR policies aren’t permanent solutions. As the FAIR Plan website clearly states, FAIR insurance is only a “temporary safety net.” Another way of putting that: FAIR insurers may be the only insurance providers on the planet that actually want you to take your business elsewhere.
FYI: Not even traditional home insurance policies cover flood and earthquake damage. Those are always add-ons, no matter where you live.
Am I Eligible for FAIR Insurance in California?
If you own property in an area prone to wildfires and you want to apply for temporary FAIR coverage, the first thing you’ll need to do is prove you’ve tried to find a regular policy. After that, your property has to meet two major requirements.
First, your home, condo, or summer house can’t be “substantially” vacant. Vacant home insurance is a separate can of worms, but, in a nutshell, not even a traditional policy will cover a property that’s been empty for more than a month. Here are some quality vacant home plans we really like.
Second, your property has to pass some structural tests. If you haven’t replaced your roof in 25 years, for instance, you may not qualify. You’ll definitely want a broker to lead you through this process.
Also keep in mind that we’ve been talking about residential properties, but there’s a whole separate list of requirements for businesses.3
Did You Know? Wildfires catch pretty much everyone off guard, but that doesn’t mean we can’t reduce the risk of serious damage. Read our wildfire safety guide for tips on how to prepare your property for the worst-case scenario.
How Do I Apply for FAIR Plan Coverage in California?
Applying for FAIR insurance is a little different than shopping for a regular homeowners policy. It’s not super difficult, but there are a few extra steps you’ll have to take.
- Find a provider, also called a broker. The FAIR Plan website has a nifty tool that lets you search for brokers by ZIP code.
- Check your eligibility with your broker.
- Fill out the application form. You can find it on the California FAIR website, but you’ll want your broker to help you fill it out.
- Arrange an inspection (if needed). Depending on how high-risk your property is, you may end up paying more — or less. Only a FAIR inspector can tell you.
Extra Tip: Unlike traditional agents, FAIR brokers don’t take commissions.
How Much Does a FAIR Policy Cost?
Figuring out how much your home insurance will cost is notoriously tricky, even under normal circumstances. In our roundup of the best insurance companies in California, we reported that Californians pay an average of $1,177 per year for home insurance. That’s not bad when you consider that tornado-prone Oklahomans pay around $2,000.
FAIR policies, however, aren’t regular plans. They cost more. A lot more. According to the California FAIR Plan, the average FAIR policy comes in at around $3,200, which is not the news I’d want to deliver to any homeowner.
If there’s any light at the end of this tunnel, it’s the California Insurance Commissioner’s Safer From Wildfires initiative, which passed late last year. According to the Commissioner’s framework, homeowners who take safety measures such as upgrading roofs and windows and creating defensible spaces will see lower insurance premiums.
Did You Know? There are currently 100,000 property owners in California at extreme risk of wildfire. That number is expected to reach 600,000 by 2052.6
It’s almost impossible to imagine being denied home insurance when you need it most, or being forced to pay three times what other homeowners pay in your state just because of the area you live in. But that’s the situation in California.
Under those circumstances, it’s tempting to opt out of home insurance altogether. But you can’t. Even if it wasn’t a requirement for your mortgage, you still wouldn’t want to go even a day without enough coverage to build back after a disaster, especially if your home lies in a wildfire zone.
FAIR plans provide a decent solution to at least one of the problems 100,000 Californians currently face. Unless your home is falling apart, you shouldn’t be denied coverage. As for those exorbitant fees, Californians with high-risk properties can be hopeful that real relief is on the way thanks to the efforts of the California Insurance Commissioner.
California’s FAIR Plan was introduced in 1968.
On average, insurance purchased through the FAIR Plan costs $3,200 per year, but that may change soon.
FAIR Plan policies cover property owners for the following named perils: fire, smoke, lightning damage, and explosions.
That depends. Your property has to satisfy certain structural requirements and you have to prove you’ve been turned down by traditional insurers.
No, flood and earthquake insurance are always separate. Check out our homeowners guide to water damage for a more detailed discussion.