Understanding California’s FAIR plan

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Home insurance in California is not legally required, but if you have a mortgage on your home, your lender might require you to purchase coverage. Even if your mortgage is paid off, buying homeowners insurance in California is a good investment and provides you and your family with financial peace of mind.

However, rating factors like the age of your home and your claims history, as well as the risk of wildfires in your area, can make it difficult to find a private insurer that will cover your home with a standard property policy. High-risk homeowners can purchase insurance through California’s FAIR plan.

California’s FAIR Plan explained

The California FAIR Plan Association provides basic fire insurance to high-risk homeowners that cannot get insurance through a preferred property insurer. The FAIR Plan is offered through a shared market where licensed insurance companies agree to share the risk of California homeowners who do not qualify for voluntary coverage.

California’s FAIR Plan is a last resort option. The FAIR Plan Association recommends that California homeowners apply for private insurance several times before applying for FAIR Plan coverage. Additionally, homeowners must meet certain requirements to qualify for the FAIR Plan.

What California’s FAIR Plan covers

A basic insurance policy from the California FAIR Plan only includes dwelling coverage for named perils, such as fire, lightning, internal explosion and smoke. However, homeowners have the option to purchase add-on coverages for more comprehensive protection. Here are the standard coverage options available for a dwelling policy through the California FAIR Plan:

  • Dwelling coverage: Dwelling insurance protects the physical structure of your home from covered perils, such as windstorms, hail, water damage from burst frozen pipes, theft and vandalism. FAIR Plans cover the dwelling at actual cash value (ACV) versus replacement cost value.
  • Other structures coverage: Other structures coverage protects detached structures like a garage, porch, shed or fence.
  • Personal property coverage: Personal property coverage pays to replace personal belongings that are damaged in a covered peril, such as electronics, furniture and clothing. FAIR Plans cover personal property at ACV.
  • Fair rental value coverage: This endorsement is available for rental properties and covers lost income if the unit is unable to be lived in due to damage sustained from a covered peril.
  • Dwelling replacement cost coverage: This endorsement covers the dwelling at replacement cost value (RCV), which does not include depreciation.
  • Personal property replacement cost coverage: This endorsement covers personal belongings at RCV, which replaces items at their current replacement value with no depreciation factored in.
  • Ordinance/law coverage: After a covered loss, this endorsement pays to make structural upgrades to a home so it meets residential building codes.
  • Debris removal coverage: This endorsement pays to clean up debris on the property after a storm.
  • Inflation guard protection: This endorsement will automatically raise coverage limits based on inflation, without paying out-of-pocket for more coverage.
  • Plants, shrubs and trees coverage: This endorsement includes $250 for landscaping losses.
  • Outdoor radio and TV equipment, awnings and signs coverage: This endorsement covers outdoor equipment, signs and awnings from covered perils, with the exception of wind or hail storms.
  • Improvements, alterations and additions coverage: This coverage is available for condo owners, and covers damage to improvements or alterations in your unit.
  • Earthquake insurance: FAIR Plan customers can purchase a separate earthquake insurance policy through the California Earthquake Authority (CEA).

Who is eligible for California’s FAIR Plan

California FAIR Plan insurance is offered for owner- and tenant-occupied buildings, seasonal homes, condos and rental properties (personal property coverage only). To get coverage, homeowners must meet certain criteria. FAIR Plan applicants must own a single-family home, townhome, condo or have a rental unit in California, and the home must meet certain building requirements.

Some homeowners do not meet FAIR Plan criteria, even if they are considered high-risk. The FAIR Plan does not cover vacant homes that are unoccupied for 50% of the year, homes with existing damages that have not been repaired and homes that are tied to illegal activity based on state and federal laws.

How much California’s FAIR Plan costs

California FAIR Plan premium varies based on a number of rating factors, according to the Insurance Information Institute (Triple-I). This includes the location, age and condition of the home, proximity to a fire station, the homeowner’s claims history, the types and amount of coverage and the deductibles chosen.

However, FAIR Plans are typically more expensive than standard home insurance policies. In California, the average homeowner pays $1,166 per year for property insurance. With a FAIR Plan, homeowners should conservatively expect their rate to be higher than the statewide average.

How to get California’s FAIR Plan

California FAIR Plan insurance can be purchased directly through the FAIR Plan’s website or through a licensed insurance agent in the state. Homeowners can use the online broker search tool to find local agents in or near their ZIP code. Brokers do not collect a fee when selling FAIR Plan insurance policies like they do with standard home policies.

The California FAIR Plan Association recommends that homeowners work with a local agent to obtain coverage. A broker can help homeowners complete their application, file their application and provide an instant rate quote. An agent can also help the homeowner purchase additional coverage, make changes to their policy and file claims on their behalf.

Frequently asked questions

What is the best home insurance company in California?

The best homeowners insurance company in California is different for everyone. It depends on what type of insurance the homeowner wants, how much coverage they need and what their budget is. Some of the highest-rated home insurers California include Amica, Erie, State Farm and USAA.

Do I need earthquake insurance in California?

For most homeowners in California, earthquake insurance is not required. However, homeowners who live in high-risk earthquake zones might need to have coverage to satisfy their mortgage lender. Even without a home loan, California earthquake insurance is valuable. Standard home insurance policies do not cover earthquake damage, so without proper coverage, homeowners are responsible for covering the cost of all repairs out-of-pocket. The Triple-I recommends all California homeowners consider adding earthquake coverage.

Does the California FAIR Plan cover wildfires?

The California FAIR Plan covers fire damage and smoke damage, from wildfires and other structure fires. Fire coverage applies to the structure of the home and the personal belongings inside the home.