A Complete Guide for California Homeowners

What Is the California FAIR Plan?

The California Fair Access to Insurance Requirements Plan, commonly known as the FAIR Plan, is a state-mandated insurer of last resort that provides basic property insurance to homeowners who cannot find coverage in the private insurance market. Established in 1968 under the California Insurance Code, it was created to ensure that all California property owners have access to at least basic fire protection, even when private companies refuse to cover them.

Despite being regulated by the California Department of Insurance under Commissioner Ricardo Lara, the FAIR Plan is not a government agency and is not funded by taxpayers. Instead, it operates as a shared risk pool made up of all insurance companies licensed to sell property insurance in California. Every admitted insurer in the state is required to participate in the FAIR Plan in proportion to their market share. If the FAIR Plan runs out of money to pay claims, it can assess member insurance companies, who may then pass up to half of those costs on to their own policyholders statewide.

The plan was originally designed as a temporary safety net for homeowners in high-risk areas. However, as wildfires have intensified and major private insurers have scaled back or left the California market, the FAIR Plan has become the primary option for hundreds of thousands of California residents. As of early 2026, the FAIR Plan held roughly 668,000 active policies, up from approximately 154,000 in 2019, representing more than a four-fold increase in just six years.

How the FAIR Plan Works

Eligibility

The FAIR Plan is designed strictly as a last resort. A homeowner qualifies to apply only after being denied coverage by at least one admitted carrier in the private market, or if coverage in the traditional marketplace is simply unavailable for their property due to its risk profile. If a private insurer is willing to cover your home, the FAIR Plan is not the right choice, and a FAIR Plan application will require confirmation that you have made a diligent search for private coverage first.

How to Apply

Homeowners apply through a licensed insurance agent or broker, not directly through the FAIR Plan itself. The broker conducts a required diligent search for coverage in the traditional market on the homeowner’s behalf. If that search fails to turn up an available policy, the broker helps complete a FAIR Plan application. There is no additional cost to the homeowner for using a broker, and brokers are compensated through the policy itself.

What the FAIR Plan Covers

The base FAIR Plan homeowners policy is a named-peril policy, meaning it covers only the specific risks listed in the policy. Standard coverage includes:

• Fire and lightning
• Smoke damage
• Internal explosions
• Riot and civil commotion (with endorsement)
• Windstorm and hail (with Extended Coverage Endorsement)
• Vehicle collision damage (with endorsement)
• Vandalism and malicious mischief (with endorsement)

The maximum dwelling coverage limit for residential policies is currently $3 million, which was raised from $1.5 million under reforms pushed by Commissioner Lara. Policyholders can also apply up to 10 percent of their dwelling coverage toward additional living expenses if they are displaced from their home after a covered event.

What the FAIR Plan Does Not Cover

The FAIR Plan leaves significant gaps in coverage that homeowners must understand before relying on it as their only policy. Standard FAIR Plan policies do not include:

• Theft or personal property theft
• Water damage from flooding, sewer backup, or gradual leaks
• Personal liability coverage
• Separate coverage for detached structures like garages or fences
• Replacement cost coverage (policies cover actual cash value only, meaning depreciation is deducted from claims)
• Earthquake coverage
• Additional living expenses as a standalone coverage line

Many homeowners are surprised to learn that their FAIR Plan policy will not pay to rebuild their home at today’s construction costs because of the actual cash value limitation. This can result in a significant shortfall if a home is destroyed.

Payment Options

The FAIR Plan offers three payment structures for annual premiums. The first is a full-pay option where the homeowner pays the entire annual premium at once. The second is a tri-annual plan with three installments paid at 40 percent, 30 percent, and 30 percent of the premium. The third is a monthly installment plan with an initial payment of approximately 16.67 percent followed by ten equal monthly payments.

What the FAIR Plan Expects from Homeowners

Property Condition Requirements

Before issuing a policy, the FAIR Plan may inspect the property or require documentation to confirm it meets basic insurability standards. Homes that are severely dilapidated, have major electrical or plumbing hazards, or are left vacant without adequate safeguards may be ineligible or subject to conditions before coverage is bound.

Defensible Space

California law requires most homeowners in high-risk fire areas to maintain defensible space around their homes. This typically means clearing at least 100 feet of vegetation from the structure (or to the property line if it is smaller). The FAIR Plan and private insurers alike may inspect for compliance, and failing to maintain defensible space can result in a policy being canceled or non-renewed. It can also disqualify a homeowner from available discounts.

Home Hardening and Mitigation

Under Commissioner Lara’s Safer from Wildfires initiative, the FAIR Plan is required to offer discounts to policyholders who take steps to make their homes more fire resistant. Actions that may qualify for rate reductions include:

• Installing a Class A fire-rated roof (metal, concrete, or tile)
• Using ember-resistant vents to prevent fire from entering the attic or crawlspace
• Installing multi-pane tempered glass windows
• Replacing wood siding with fire-resistant materials
• Building or maintaining a covered patio or deck with fire-resistant materials
• Completing a home hardening assessment through a certified program

Homeowners who have completed the IBHS Wildfire Prepared Home designation or participated in a community-level fire mitigation program may also receive additional consideration when the FAIR Plan or private insurers evaluate their application.

Annual Review and Renewal

FAIR Plan policies renew annually and are subject to re-underwriting. As the market has improved slightly through state reforms, homeowners on the FAIR Plan are encouraged to work with their broker each year to check whether private market coverage has become available again. The California Department of Insurance’s clearinghouse program is specifically designed to help transition FAIR Plan policyholders back into the private market when conditions allow.

Filling the Gaps with a Difference in Conditions Policy

Because the FAIR Plan leaves so many coverages out, most homeowners who rely on it should also purchase a Difference in Conditions policy, commonly called a DIC policy. A DIC policy is sold by private insurers and is specifically designed to wrap around a FAIR Plan policy to fill in what the FAIR Plan does not cover.

A typical DIC policy adds coverage for theft, water damage, personal liability, loss of use and additional living expenses, and sometimes even floods and earthquakes. When combined with the base FAIR Plan, a homeowner can often construct coverage that is roughly equivalent to a standard HO-3 homeowners policy. Your insurance broker can help identify DIC policy options and combine them with your FAIR Plan policy.

It is worth noting that in some lower-risk ZIP codes, a FAIR Plan policy combined with a DIC policy can actually cost less than a comparable private market HO-3 policy. Legislators and regulators have been watching this trend closely, as the FAIR Plan was designed only for the highest-risk properties and is not intended to compete with private insurers as a value option.

The Private Insurance Market and How It Differs from the FAIR Plan

Why So Many Companies Have Left

Starting around 2022, California experienced a significant withdrawal of private insurers from the homeowners market. Seven of the state’s twelve largest home insurance carriers by market share either paused new policies, limited their exposure, or stopped renewing existing policies. State Farm, the largest insurer in California, stopped accepting new applications in May 2023. Allstate followed that same year. Farmers Limited its new writings and saw its direct subsidiary exit the state. Nationwide, The Hartford, Tokio Marine, and Trans Pacific Insurance also reduced or ended their California homeowners offerings.

The primary reason insurers cite is the mismatch between the risks they face and the rates they are permitted to charge. Under California’s Proposition 103, passed in 1988, insurers must base their rates on historical loss data rather than forward-looking risk models. As wildfire risk has grown faster than historical data reflects, insurers found they could not charge enough to justify staying in the market. Additionally, reinsurance costs, which are what insurance companies pay to protect themselves against catastrophic losses, have risen dramatically worldwide, further squeezing margins for California writers.

Recent Market Reforms

To address the crisis, Insurance Commissioner Lara implemented the Sustainable Insurance Strategy, which represents the most significant reform to California’s insurance regulations in decades. A central element of this strategy allows insurance companies, for the first time, to use forward-looking catastrophe models when setting their rates, rather than being limited to historical loss data. In exchange for this flexibility, insurers are now required to write and maintain policies in wildfire-distressed areas.

The California Department of Insurance completed its review of the Verisk Wildfire Model and other catastrophe models in 2025. Mercury Insurance, Allstate, and CSAA were among the first to announce plans to expand their California offerings under the new framework. Farmers Insurance also eliminated its cap on new homeowners policies in November 2025 and submitted a new rating plan under the Sustainable Insurance Strategy. These changes are expected to gradually improve the availability of private market options for homeowners who currently have no choice but the FAIR Plan.

How Private Policy Rates Are Determined

Private market insurance companies set rates based on a combination of factors including the property’s location and proximity to wildland areas, the construction type and age of the home, the roof material and condition, proximity to a fire hydrant and fire station, the homeowner’s claims history, and now, under new rules, forward-looking wildfire risk models. Properties that score better on these factors receive lower rates, which is why home hardening improvements can meaningfully reduce premiums.

Private policies typically offer broader coverage than the FAIR Plan, including replacement cost coverage (meaning the insurer pays to rebuild at current construction prices without deducting depreciation), liability coverage, theft, water damage, and loss of use. They also tend to have clearer and more comprehensive claims handling processes.

Companies That May Offer Lower Rates Than the FAIR Plan

Even in the current difficult market, a number of admitted and non-admitted insurers continue to write homeowners policies in California. Rates vary considerably depending on your location, home characteristics, and coverage needs, so working with an independent broker is strongly recommended. The following companies are among those currently writing California homeowners policies as of early 2026.

Important note: Insurance market availability changes frequently. Always contact companies directly or through a licensed broker to confirm current availability in your ZIP code. Rates are highly individualized and will vary.

Excess and Surplus Carriers

If admitted market options are not available for your property, non-admitted or Excess and Surplus carriers can fill the gap. These companies operate outside California’s standard regulatory framework, giving them more flexibility to insure high-risk properties. They are not backed by the California Insurance Guarantee Fund, so it is especially important to verify financial strength ratings before purchasing. Well-known E and S options in California include:

• Lloyd’s of London (accessed through specialty brokers)
• Lexington Insurance (AIG’s surplus lines division)
• Markel Insurance
• Westchester (a Chubb company)
• Delos Insurance Solutions (delosinsurance.com)
• Sagesure Insurance

How to Find Lower Rates: Practical Steps for Homeowners

Work with an Independent Broker

An independent insurance broker has access to multiple carriers and can shop your property across admitted, E and S, and specialty markets simultaneously. Unlike captive agents who represent only one company, an independent broker is motivated to find you the best combination of price and coverage. Given how rapidly the California market is changing, brokers with deep experience in high-risk properties are especially valuable.

Harden Your Home

The single most impactful thing a California homeowner can do to improve both coverage options and rates is to reduce the wildfire risk of their property. Under Commissioner Lara’s Safer from Wildfires regulation, insurers are required to offer discounts for verified mitigation measures. Replacing a wood shake roof with a Class A fire-rated alternative, installing ember-resistant vents, clearing defensible space, and using fire-resistant decking materials can all reduce your premium by 10 to 25 percent depending on the insurer and the scope of improvements.

Bundle Policies

Most insurers that write homeowners policies in California also write auto insurance. Bundling your home and auto with the same carrier typically generates a discount of 10 to 25 percent on both policies. This can meaningfully offset higher homeowners premiums.

Raise Your Deductible

Increasing your deductible from a standard $1,000 to $2,500 or higher can reduce your annual premium by 10 to 15 percent. This approach works best for homeowners who have sufficient savings to cover the higher out-of-pocket cost in the event of a claim.

Avoid Small Claims

Filing small claims, especially multiple claims in a short period, can trigger a non-renewal notice or a significant rate increase. California homeowners should use their insurance for major catastrophic losses and handle minor repairs out of pocket when financially feasible.

Re-Shop Every Year

The California market is shifting rapidly as new regulations take effect. A property that was uninsurable in the private market two years ago may now qualify as insurers return and adopt new risk models. Make it a practice to have your broker re-shop your coverage at every renewal, and ask specifically whether the clearinghouse program has identified any private market options for your property.

Contact the California Department of Insurance

The California Department of Insurance offers free consumer assistance for homeowners struggling to find coverage or understand their options. If you have concerns about a non-renewal, a rate increase, or a claims dispute, the Department can help.

• Phone: 1-800-927-4357
• Website: insurance.ca.gov
• TTY: 1-800-482-4833

This article is provided for general informational purposes. Insurance availability, rates, and regulations change frequently. Consult a licensed California insurance broker for advice specific to your property and situation.