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Understanding the California FAIR Plan

On Behalf of | Apr 24, 2023 | Insurance Law

If you’re a property owner in California, you probably know that finding insurance coverage can sometimes be difficult in areas with a high risk of natural disasters. This presents serious issues for property owners and can interfere with mortgages.

The California FAIR plan is a government-offered insurance plan available to certain property owners who otherwise don’t qualify for property insurance. But insurance law can be complicated, and it’s important to understand the ins and outs of FAIR plans.

The basics on the FAIR plan

A California FAIR plan offers property insurance to qualified applicants, even in many instances when no other insurer will consider that property.

FAIR plan insurance offers protection against perils such as fire, explosions, smoke and lightning. Supplemental FAIR plan coverage is available for purchase, covering additional liabilities, such as lost rental income and personal property damage.

Conditions and limitations

While the FAIR plan can be a better option than nothing, it’s not an ideal insurance program. Rates are expensive compared with most private insurance plans, and coverage is fairly limited.

If it’s possible to get a private insurance policy, it will almost always be a better alternative to a FAIR plan. Only if you’ve been rejected (likely multiple times) by private entities should you consider a FAIR plan.

Remember that not every property owner is eligible for a FAIR plan, even if they cannot get private insurance. The two biggest reasons an applicant might be rejected is that the property is normally vacant for more than half the year or having unrepaired damage.

The California FAIR plan exists to fill a void for certain property owners who cannot get conventional private insurance due to the risks associated with their properties. This coverage is limited in scope and expensive, but it may be a preferable option to no coverage at all.