First, let’s dispel the common belief that the California FAIR Plan (CFP) is a government agency – it isn’t. There are no taxpayer dollars involved and the individuals in charge are not government officials. The FAIR Plan is financed collectively by each admitted insurance company that writes insurance in California.
The California FAIR (Fair Access to Insurance Requirements) Plan was founded in 1968 to deliver basic home insurance to people that are otherwise unable to get a policy in the private, voluntary market. The number of uninsurable homes has steadily risen since then. The last three years have seen a rapid increase in uninsurable homes and forced the CFP to make some necessary changes.
We often receive questions about the financial stability of the FAIR Plan and the claims process. The CFP states that it’s “stronger than any single insurer, since it is backed by the capital and surplus of all insurance companies writing property in the state.” If you have a claim with the FAIR Plan, rest assured that there will be money to pay for it and it will be handled in a professional manner.
What is Covered by the California FAIR Plan?
Unlike a standard homeowner’s policy, the FAIR Plan only offers coverage for a limited number of perils; they are fire, lightning, internal explosion, and smoke.
To supplement the FAIR Plan policy, we recommend purchasing a Difference in Conditions (DIC) policy. Sometimes referred to as “Wrap” policies, a DIC policy provides needed coverages such as medical payments and liability. In addition, a DIC policy covers losses to the home from additional perils such as sudden and accidental water damage.
There are some homes that the FAIR Plan will not accept:
- Homes with existing damage. The exception to this is if there is a signed repair contract with an independent license contractor.
- Vacant homes. A home is considered vacant if it’s been unoccupied for longer than a year.
- Homes with illegal activity. Any home in violation of a federal, state, or local law is ineligible. The most common violation is the growing and selling of marijuana.
Will the California FAIR Plan insure my manufactured home?
Yes, the FAIR Plan does insure manufactured homes. However, the coverage is only provided on an Actual Cash Value (ACV) basis. ACV coverage is less coverage than the Replacement Cost offered on standard construction homes.
Does the California FAIR Plan inspect my home?
Yes. As any insurer of a home in a high fire danger area would, the FAIR Plan will conduct an external inspection of the home. This is for the Plan’s benefit as well as your own – it is in each party’s best interest that the home has the best chance of being claim free. Occasionally, they will issue recommendations or requirements to improve the fire defensibility of the home.