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California FAIR Plan vs. Your Homeowner's Insurance

California FAIR Plan vs. Your Homeowner's Insurance

As we see an increase in the volatility and length of our fire seasons, it's hard not to worry about the future of our beloved Golden State. What does this mean for home insurance policies in California? Many insurance companies are non-renewing customers in high-risk fire zones (which at this point, feels like most of California). This doesn't mean you should cancel that insurance policy, though.

Standard insurance policies often protect against environmental factors like flood or external risks like theft. As a solution to the challenge of finding an insurance company that will cover your home against wildfire, the California FAIR plan was created. According to a court ruling in November of 2019, the FAIR plan was created to be a safety net for consumers and meet the increasing challenge of wildfire risk (according to Deputy Insurance Commissioner Michael Soller).

The FAIR Plan is not a state agency and is not funded by taxpayers. It is funded by private insurance companies, who are required to participate in the plan if they want to do business in California.

FAIR Plan policies have increased an average of 8% per year since 2016, coinciding with some of the most destructive wildfires in state history. The Camp Fire in 2018 killed 85 people and destroyed roughly 19,000 buildings, generating $12 billion in insurance claims.

Insurance companies in California have declined to renew nearly 350,000 policies since 2015 in areas at high risk for wildfires. That data, which comes from the state Department of Insurance, does not include information on how many people were able to find coverage elsewhere or at what price.

– Claims Journal News