Details
The California FAIR Plan is the state’s insurer of last resort. If you cannot get coverage in the ordinary market — increasingly common in wildfire-exposed areas — it will write you a policy. It is deliberately narrower than a homeowners policy, and the gap is where people get hurt.
What the basic policy covers
The FAIR Plan provides basic fire coverage: the perils of fire or lightning, internal explosion, and smoke. For additional premium, extended coverage can be added — windstorm, hail, explosion, riot or civil commotion, aircraft, vehicles and volcanic eruption — as can vandalism and malicious mischief.
What it does not cover
This is the part to read twice. The FAIR Plan does not cover all the perils a traditional homeowners policy does. Notably absent are liability and theft, and the California Department of Insurance has described the residential policy as bare-bones, leaving homeowners to buy additional coverage for liability, water damage and other common perils.
Liability is the one people overlook. Without it, an injury to a visitor on your property is not covered.
The wrap-around policy
The usual answer is a Difference in Conditions policy — a DIC — bought from a regular insurer to sit alongside the FAIR Plan policy and cover what it leaves out. Together they approximate a standard homeowners policy.
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The Department of Insurance has noted that many FAIR Plan policyholders do not, and in some cases cannot, obtain a DIC policy, which widens the coverage gap in exactly the communities most exposed. If you are placed with the FAIR Plan, ask about a DIC at the same time rather than later.
It is meant to be temporary
The FAIR Plan describes itself as a temporary solution for those who cannot obtain coverage in the traditional market. It is worth re-shopping the ordinary market periodically rather than treating the FAIR Plan as permanent.
Who regulates it
The California Department of Insurance oversees the FAIR Plan, and the Insurance Commissioner has ordered expansions of its coverage options. The Department is also where consumer complaints about a policy or a claim go.
Coverage terms, limits and available endorsements change. Read the policy you are actually offered and confirm current terms with the FAIR Plan and the Department of Insurance.