The difference between regular home insurance and the California FAIR Plan

The California FAIR Plan and regular homeowners insurance offer property coverage, but they serve different purposes and have notable differences. Understanding these can help you decide which is right for your situation.

 Regular Homeowners Insurance

– Comprehensive Coverage: Regular homeowners insurance policies typically offer a broad range of protections, including dwelling coverage, personal property, liability protection, and additional living expenses if your home becomes uninhabitable due to a covered peril.

– Customization: Policies can be customized with various endorsements to cover specific risks not included in a standard policy, such as earthquake or flood coverage.

– Cost and Underwriting: Premiums are based on the home’s value, location, the owner’s claims history, and other risk factors. Insurers may deny coverage based on a property’s condition, location in high-risk areas, or the owner’s claims history.

– Claims Process and Customer Service: Insurers provide comprehensive customer service and support throughout the claims process, including help with repairs and replacements.

 California FAIR Plan

– Purpose: The California FAIR (Fair Access to Insurance Requirements) Plan is a last-resort insurance pool designed to provide basic fire insurance coverage for properties in high-risk areas that cannot obtain insurance through the regular market.

– Limited Coverage: The FAIR Plan primarily offers coverage against fire, lightning, internal explosion, and smoke. It does not include theft, liability, or most other coverages typically found in a standard homeowners policy. Policyholders often purchase a separate Difference in Conditions (DIC) policy to cover other perils like theft or liability.

– Eligibility: Available to homeowners who have been unable to obtain insurance in the standard market due to their property being in a high-risk area.

– Cost: Premiums can be higher than standard insurance policies due to the higher risk associated with insuring properties in wildfire-prone or other high-risk areas.

– Application Process: Applicants must demonstrate they have been rejected by at least one standard insurer and meet underwriting guidelines related to property maintenance and fire safety.

 Key Differences

– Coverage Scope: Regular homeowners insurance offers more comprehensive coverage, including liability and theft, while the FAIR Plan provides basic fire insurance for those who cannot get standard insurance.

– Purpose and Eligibility: The FAIR Plan is specifically for homeowners in high-risk areas who can’t find coverage in the standard market, unlike regular insurance which is widely available.

– Cost: FAIR Plan premiums might be higher due to the increased risk, and it often requires a separate policy to provide complete coverage similar to a standard homeowners policy.

For homeowners in California, the choice between the FAIR Plan and regular insurance often comes down to availability and the need for coverage in high-risk areas. If possible, it’s generally preferable to go with standard homeowners insurance for broader coverage and better customer service. However, for those in high-risk areas who have no other options, the FAIR Plan provides a necessary safety net.