Questions and Answers on the California FAIR Plan Association
What exactly is the FAIR Plan? Why was it Created?
The California FAIR plan, based out of Los Angeles, is a fire insurance pool set up by the State of California to offer fire insurance to property owners who have been denied insurance through the regular insurance channels. FAIR stands for Fair Access to Insurance Requirements. It gives people another choice for finding insurance, when standard insurance companies consider their home to be too high a risk for fire. Each participating carrier shares the risk for the exposure based on their percentage of property business they write in the state of California. The FAIR plan is administered by the state, and applications are submitted to FA IR plan through their insurance broker/agent.
The History behind the Association
The plan was setup in 1968 by the legislation in the state of California to help buffer the insurance market and to give people Fair Access to Insurance Requirements, thus the name FAIR plan. It was setup with the idea of helping people rebuild after the fires and riots of the 1960’s. The state realized that something needed to be done to assist people with rebuilding efforts after disasters, since many insurance carriers would not insure properties in those high risk areas due to excess exposure.
Who Can Participate in the FAIR Plan
Most of the policies that are written under the FAIR plan are located near urban inner city areas or they are in a place where wildfires are a natural hazard. However, in essence, anyone can participate in the FAIR plan. Anyone who owns property and has failed to meet the underwriting guidelines of regular insurance carriers. Properties must meet some underwriting guidelines set up by the FAIR plan, but most people who apply can get coverage for their property. For example, someone who lives in the hills in Brentwood, CA or Bel Air, CA and has tried to obtain insurance through the regular channels and has been denied due to brush exposure may find it possible to get coverage through the FAIR Plan association.
What Locations Benefit from its Creation
FAIR plan policies are usually sold in areas of brush fire hazard. For example the Brentwood Hills, Bel Air canyon, Malibu, Topanga, Mandeville Canyon and most of the other brush areas in around Beverly Hills and Hollywood Hills.
How Do People Get the Coverage?
The FAIR plan can be bought through any insurance agency that is licensed to sell residential policies in the state of California. The California Department of Insurance keeps a list of the companies who can offer the plan to anyone needing to participate. People living in Los Angeles need to call a provider on the list to start the process of getting insurance. An authorized agent must submit an application for the insured, so that they can determine amount of replacement cost necessary to rebuild the home and its appurtenant structures.
What Does the FAIR Plan Offer in Terms of Coverage?
The FAIR plan offers insurance coverage that includes:
- Dwelling and personal property protection for single family dwellings or homes being rented. This policy gives basic protection of Fire, Extended Coverage Vandalism and Malicious Mischief (policies DO NOT include theft, liability or water damage)
- Commercial property protection for apartment complex buildings, office complex and other related structures
- BOP ‘s also known as a Business Owner Policy. This policy is used to cover businesses that are small to medium size.
- Construction coverage for buildings under construction.
- Earthquake coverage offered through the California Earthquake Authority
Please note, the FAIR plan does not estimate what it will cost to rebuild properties. They do not estimate the labor costs or construction materials needed to complete the rebuilding project. Instead, it is the consumer’s responsibility to have an estimation done by an authorized agent to determine the rebuilding costs and replacement values on building and personal property.
The Best way to File a Claim
To report a claim under the FAIR plan policy holders should report the problem directly to FAIR plan personnel. Independent agents cannot deal with the claims or handle any issues of policyholder claims. The insured must be the one to file the claim since they are the policy owners.
History of Payouts
Suffering a loss affects everyone involved in the process of restoration. The property owner has to deal with the destruction. The insurance companies have to deal with paying the claims from the disaster. For example, in 1993 it is estimated the FAIR plan had to set aside nearly $98 million for the fire the ripped through the Malibu and Calabasas area. All the participating insurance carriers in the insurance pool shared their fair share in this risk. This makes for a sharing of the risk and allows FAIR plan to be able to face large exposures to losses, without the risk of default or inability to pay their claims.
Azy Susman, Agent