California Commissioner Orders FAIR Plan to Increase Homeowners Coverage Options

November 14, 2019

California’s property insurer of last resort will soon be offering more homeowners coverage options as directed by the state’s insurance commissioner in response to the pressure put on the property insurance market by wildfire risks.

California Commissioner Ricardo Lara has ordered the California Fair Plan Association to begin offering a comprehensive policy, known as HO-3 coverage, in addition to its current dwelling fire-only coverage by June 1, 2020. The comprehensive plan will include traditional homeowner features, such as coverage for water damage, personal liability and theft.

Read Commissioner Lara’s order to the FAIR Plan

Lara also ordered the FAIR Plan to increase coverage limits and to offer a no-fee monthly payment plan, as well as allow for policyholders to pay by credit card or electronic funds transfer without any fees. The new payment options should be available to policyholders no later than Feb. 1, 2020, the commissioner’s order states.

Effective April 1, 2020, the FAIR Plan will increase the combined dwelling coverage limit from $1.5 million to $3 million. In many areas where people are forced to turn to the FAIR Plan for coverage, they find the current $1.5 million coverage limit is not enough. Needing to find additional coverage, they often then turn to the surplus lines market, the CDI said.

The California Department of Insurance said the growing lack of availability of homeowners and fire insurance has touched virtually every county in the state and threatens home values, real estate transactions, tax revenues, emergency services, and the integrity of California communities.

In a media release, Lara said he has met with “with thousands of California homeowners across the state who are struggling to find coverage to protect their homes.”

Property owners who have no choice but to use “the FAIR Plan as temporary insurance deserve the same coverage provided by traditional insurers. This crisis requires the FAIR Plan to provide a comprehensive option for Californians who have no other option for homeowners insurance,” he added.

The above changes are in addition to others the FAIR Plan undertook earlier this year. Those operational adjustments include providing more transparency in their meetings and allowing the CDI to participate in those meetings. The FAIR Plan also must obtain the approval of the insurance department prior to disbursing operating profits back to participating insurers.

The FAIR Plan, established under California law, is intended as a temporary solution. However, it is important that its product mirrors traditional coverage as much as possible, according to the CDI.

Many of the affected California homeowners have already been inconvenienced by planned power outages by utilities, mandatory evacuations, and repeated wildfire threats year after year. Requiring these same homeowners to have to piece together multiple policies to achieve full coverage is needlessly burdensome, Lara said.

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