What is the California FAIR Plan?
A California FAIR Plan policy is a bare bones fire insurance policy. According to the California Department of Insurance it “should only be considered after a diligent search for coverage in the traditional insurance market. ”
The FAIR Plan is an association located in Los Angeles composed of all insurers authorized to transact basic property insurance in California. FAIR is only to be used after an exhaustive search has been completed and no better options have materialized. It is actually meant to be a temporary safety net for homeowners who do not have access to fire insurance from traditional carriers and truly a last resort!
There are underwriting criteria to qualify for Fair. They will not cover (1) Vacant Properties, nor buildings with (2) existing damage (that is not currently being repaired), (4) nor a property that is being used for illegal purposes. There are other limits as well. For example, CA FAIR Plan policies max out at a total insurance limit of $3,000,000 for all coverages combined (building, personal property, fair rental value, ordinance & law, etc.). This can be a major issue for high value homes!
At its most basic the FAIR policy covers your home from the following:
- Fire
- Lightening
- Smoke
- Internal Explosion
That is it. There are a few optional coverage that can be added to the policy such as:
- Vandalism and Malicious Mischief
- Windstorm and Hail
- Explosion
- Riot
- Aircraft and Vehicles
The policy is notable in that it does NOT cover you for a variety of other perils that are commonly included on typical Homeowners Policies. These include (but are not limited to):
- Theft
- Falling Objects
- Weight of Ice and Snow
- Accidental Discharge
- Freezing
- Artificial Sudden Electric Current
- Personal Liability, nor Liability of Any Kind
- Medical Payments
- Damage to Properties of Others
There are also additional Endorsements that most traditional policies have that are not available with a FAIR policy. These include items such as Mold Coverage, Personal Injury, Water Back Up, etc. Those are just a few examples of the many significant differences. All of this adds up to make the California Fair Plan not at all a good product by itself.
If the last resort is a CA FAIR Plan policy, there are two ways to help bridge the gap in coverage between a CFP policy and a “traditional” homeowners policy: a Difference In Conditions Policy (DIC) or a Comprehensive Personal Liability Policy (CPL).
What is a DIC policy?
A DIC policy stands for Differences in Conditions. It is a special limited property policy that pairs with the FAIR plan. The DIC policy attempts to round out the coverage for the consumer by providing coverage for those perils that FAIR excludes. The limits on a DIC policy must match the limits on the DIC policy. DIC policies also include liability coverage for the property owner. In essence, pairing a DIC insurance policy with your FAIR policy creates a package that works similar to traditional homeowners insurance policy.
California FAIR + Differences In Condition = *ALMOST* A Total Home Insurance Package.
*it’s possible that this might be the best that you can get.
What is a CPL policy?
If for some reason you did not want to get a DIC policy because you were unwilling, unable, etc you could opt to buy a CPL or Comprehensive Personal Liability policy. A CPL is essentially a stand alone liability policy that only provides liability coverage for the property owner. A CPL does not provide any property coverage for any of the perils excluded by the FAIR policy.
A CPL is not a proper replacement for a DIC policy. For more information on the differences between CPLs and DICs, please contact us.
California FAIR + CPL = Bare Minimum Coverage But At Least You Have Something.
*this is generally not a good solution.
Why do people need to buy a policy with FAIR?
Simple, consumers often need to purchase a FAIR policy because they do not have access to any other form of home insurance. It is important to note that you can not just opt to buy a FAIR policy because you wish to. You are only allowed to buy it if you cannot get regular home (HO3) or dwelling (DP3) Insurance.
In recent years, the number one reason that consumers are forced to purchase a CA FAIR plan policy is because of wildfire risk here in California. The ever changing fire ratings and fire hazard zones mean that traditional insurers are constantly restricting what locations they will accept for policies. When this happens, the CA FAIR Plan becomes the only option!. So while it’s a last resort, it is a very necessary program!
Please reach out to us today to review your current Risk Portfolio so we can help you navigate these complicated policy types.
