California Fair Plan Explained
A Fair Plan policy satisfies your mortgage lender’s requirements. If you’re dropped by your current carrier or if you’re closing escrow, a Fair Plan policy will be accepted by your lender.
WILDFIRE NON-RENEWAL OVERVIEW
Many Californian homeowners have felt the effects of recent wildfires. The 2018 wildfire season was the deadliest and most destructive wildfire season on record in California. As a result of catastrophic losses, underwriting and risk management strategies for many carriers have shifted. As a result, insurers are progressively non-renewing homeowners policies located in high risk areas.
WHY ARE MORE AND MORE PROPERTIES BEING INSURED THRU THE FAIR PLAN?
As weather warms up, wildfires have become more of a threat and have hit the pockets of insurance companies hard. With the unexpected rise of California wildfires, insurance carriers continue to drop homes located in wildfire areas or increase rates to offset the cost of paying out on claims. Even loyal customers who’ve been with the same insurance company for years (or even decades), are now being dropped if they’re in a wildfire area. Fortunately, most properties throughout the state can be covered thru California Fair Plan.
WHAT IS THE FAIR PLAN?
The California Fair Plan is an insurance pool which was created to make sure basic property insurance is available to people who own property in California and who, beyond their control, can’t get insurance thru other carriers due to wildfire exposure and high number of home insurance claims.
WHAT PERILS ARE COVERED BY THE CALIFORNIA FAIR PLAN?
FAIR Plan property insurance policies are "named peril" policies, meaning that only the causes of damage specified in your contract will be covered. The current version of California FAIR policies include coverage for only the following:
Fire (including damage from a wildfire)
Vandalism or malicious mischief (optional coverage that can be added so long as your house has not been vacant or unoccupied for more than a month)
Windstorms, hail, explosion, riots and civil commotion, aircraft, vehicular damage, volcanic eruptions (optional coverage that will increase your premium to add)
COVERAGE AVAILABLE THROUGH CFP
If you have a shed, separate garage or other structures on your property, you can add supplemental coverage for them.
Fair rental value coverage
Provides compensation if your house is damaged to the point that it can't be occupied.
Building code upgrade coverage
Building code upgrade coverage, also called ordinance and law coverage, will provide up to 10% of your dwelling coverage to cover any additional repairs or improvements required to get your home up to code. This can be particularly valuable if you own an older home that is significantly damaged, as you may need to upgrade its electrical or plumbing to comply with California requirements.
Coverage is provided by the California Earthquake Authority (CEA), so it can also be purchased separately.
If a covered peril causes debris to be brought onto your property, this coverage would pay for its removal.
Increases your dwelling coverage limit, and building code upgrade coverage limit if you've purchased this, to reflect changes in the cost of construction due to inflation as estimated by a third party. Note, though, that the increased coverage will mean an increased premium for fire insurance.
Plants, shrubs and trees
Up to $250 of coverage per plant, shrub or tree.
HOW DOES A DIFFERENCE IN CONDITIONS (DIC) POLICY or WRAP INSURANCE WORK WITH A FAIR PLAN POLICY?
A CFP policy DOES NOT cover losses due to theft, burglary, liability and bursting of pipes. To complete a California Fair Plan policy and “fill in the missing gaps,” we HIGHLY recommend you purchase a DIC (Difference in Conditions) also known as a Wrap policy.
DIC policies are reasonably priced and give you a lot of bang for your buck!
A DIC policy can cover:
Bursting pipes and accidental discharge/overflow of water or steam: Water claims are the #1 reason home insurance claims are made. Water damage can quickly cost thousands of dollars. For this coverage alone, a DIC policy is priceless!
Liability: This covers you if someone gets hurt on your property, if you accidentally hurt someone, and/or if your pet hurts another person/animal. This coverage follows you at and away from home.
Theft: Not only are items in your home covered from theft, but items stolen away from home or from your car are also covered.
Medical Payments to Others: Covers costs associated with injuries that happen to guests in your home, regardless of who is at fault.
Falling Objects: Such as trees falling on your roof.
Weight of Ice, Snow or Sleet
Freezing of pipes
Trees, Shrubs and other plants
A CFP policy is a great option for homes in California wildfire areas. Bundled with the DIC/Wrap policy, property owners can have complete coverage such as the coverage you’d have from a traditional home insurance policy.
HOW DO INSURANCE COMPANIES DETERMINE IF A HOME IS IN A WILDFIRE AREA?
Insurance carriers look at several factors to decide if your home is in a high brush or wildfire area.
Ease of a firetruck to reach your home. If your property isn’t easy to get to or can’t be seen from a public street, you may be considered a “high or ineligible risk.”
Your home’s location in relation to wind patterns.
Distance to a fire hydrant.
Number of wildfires in your area.
Your home’s distance from a RESPONDING (not volunteer) fire station.
The slope and elevation of your land.
Overgrown vegetation around your home.
Your home’s distance to brush.
Your Fireline Score.A score is given to your home which is based on the density of brush surrounding your property, the slope your home sits on and ease of accessibility of your home. Many insurance carriers don’t want to insure a home over a Fireline Score of 3. It becomes increasingly difficult to find traditional home insurance with a Fireline score of 6+. A Fair Plan policy combined with a DIC/Wrap policy is a great option for homes with a Fireline Score over 6.
PPC or Public Protection Classificationis based on a scale of 1-10 (low risk to high risk). The PPC score is an indication of your property’s distance from a fire station and hydrant.
WE CAN HELP
If you’ve been sent a non-renewal notice or your home insurance rates have gone thru the roof, Tex Insurance can help.
Tex Insurance provides property owners quotes and policies thru California Fair Plan (CFP). We specialize in insuring homes, second homes, income properties (landlords), condos, townhomes, vacant properties, trailer homes, mobile/manufactured homes and renters in wildfire areas.