What is the California Fair Plan?
The California Fair Plan is an insurance pool made up of all the insurers who are admitted to write property insurance in California. The Fair plan was created as a last resort insurance option for customers who ca not obtain insurance with an admitted carrier.
Created in 1968, the Fair Plan is not a state agency and does not have any taxpayer money or public funding involved in financing the Fair Plan. So how does the Fair plan stay financially solvent? If the Fair plan does not have enough capital to cover claims and expenses they will access the member companies to cover those costs. As I mentioned above, all licensed insurers that write property insurance in California are member companies of the Fair Plan. Companies like Nationwide, Safeco, State Farm, Allstate, etc.
Because the Fair Plan is permitted to assess these member companies to pay claims they are actually stronger than any single insurer. This is due to the fact that they are backed by the capital and surplus of all of these member companies.
Who is the Fair Plan the right fit for?
Since the Fair plan is a last resort they are a good fit for customers who cannot find insurance in the admitted market. Most Fair Plan customers are individuals whose properties are located in areas with high wildfire risk. It is in your best interest to find an independent agent who has access to multiple carriers and products who can check around the market for you and see if they cannot find you an admitted or non admitted carrier.
What kind of coverage does the Fair Plan offer?
The Fair plan provides coverage for fire, lightening, internal explosion, and smoke. You then have the option to add optional perils like wind, hail, riot, aircraft, vehicles, volcanic eruption, and vandalism. As of today, the Fair Plan will allow up to $3M in coverage. This will cover your dwelling, any other structures, your personal belongings, loss of use for you to live elsewhere after a loss, building ordinance coverage, debris removal, etc.
It does not provide you with liability or medical payments coverage. You would need a DIC(Difference in Conditions)policy.
The difference in conditions policy provides you with all of the common coverages a typical home insurance policy would provide you with expect it does not cover those losses covered by the FAIR plan. This would provide you with liability, medical payments, coverage for theft, water damage, falling objects, ice, snow, etc.
Changes to the Fair Plan
Effective January 1st, 2021 the California Fair Plan has taken a 15.6% rate increase. A big reason behind this is the fact that the Fair plan is simply supposed to be a last resort for customers. Unfortunately, major insurance companies continue to get hammered with wildfire losses in California. More and more California residents are left with no other option than to go forward with the Fair Plan. Over 235,000 customers had their homeowners insurance canceled or non renewed in 2019. This has led to a 36% increase in policies with the Fair plan.
Effective January 1st the Fair plan also has made some new products changes as follows:
- Two new deductible options of $15,000 and $20,000. These new deductible options may be used to offset some or all of a policy’s rate change.
- New Extended Dwelling Coverage can be purchased that provides an additional 25% of Coverage A. This coverage is not automatic and must be selected if your policyholder requests this coverage. There is an additional premium for this coverage. The premium is the same as if the policyholder increased his or her Coverage A limit by 25%.
- The available limit of Supplemental Fair Rental Value coverage is being increased to 50% of Coverage A.
With the 2020 fire season only making things worse for insurers it is expected that the Fair Plan will continued to grow at a similar pace. At Don Williams and Associates we have access to a wide range of property insurance carriers. If your property is not eligible with an admitted carrier we can also put together a package for you with the Fair Plan and a difference in condition policy as a last resort.
Give us a call today at 408-402-3646 or fill out this form and one of our insurance experts will be able to assist you!