FAIR plan insurance

Some homes are more difficult to obtain a homeowners insurance policy for than others. If you own a home in a high-risk area or if your home is in poor condition, you may find yourself in this situation. Fortunately, there are states that provide additional homeowners insurance options, with programs available such as FAIR plan insurance. 

What is a FAIR plan?

A FAIR plan is short for Fair Access to Insurance Requirements and is a type of homeowners insurance coverage. It’s a program dating back to the 1960s, specifically designed for homeowners who live in a high risk area to help them obtain a homeowners insurance policy. It’s not a discount program for insurance. Instead, it’s a subsidy program, where taxpayers and private insurance companies fund the costs. It’s sometimes referred to as a shared market. 

FAIR plans are typically found in states with high peril events, such as hurricanes and fires, where it may be more difficult for homeowners to obtain coverage in the normal insurance marketplace.

FAIR plans and high risk insurance

When a homeowner’s property is deemed high risk, it makes it more difficult to purchase a homeowner’s insurance policy. A FAIR plan then becomes the next option for those who can’t get homeowners insurance.

What constitutes a high-risk home?

A home is considered high risk is when the insurance company has determined that it has a greater likelihood of a homeowners insurance claim. This high risk could be based on several different factors, including:

• Location: If your home is located in an area with high crime or volatile weather events, such as hurricanes and tornadoes, it may be considered more prone to claims and thus deemed a greater risk.
• Age of home and maintenance required: If your home is older or in poor condition, insurance companies may view it as higher risk than other homes.
• How often home is used: A home may be considered high risk if it is vacant or seldom used.
• You’ve filed multiple claims: In this case, it’s the homeowner who is considered to be the risk rather than the home. If you’ve filed multiple claims, an insurance company may worry that you’ll file more in the future.

How do FAIR plans work?

FAIR plans offer coverage for losses to your home due to fire, windstorm, vandalism and riots. FAIR plans typically cover fewer perils than a traditional homeowner’s policy. Some states’ FAIR plans offer liability coverage in addition to dwelling coverage, but FAIR plans frequently do not include liability coverage. Some states offer additional peril coverage specific to the location. For instance, the Georgia FAIR plan specifically covers wind and hail damage for certain coastal communities. 

FAIR plan coverages vary from state to state. For instance, the Indiana FAIR plan offers a maximum of $250,000 in dwelling coverage, whereas the California FAIR plan offers coverage up to a maximum of $3,000,000 for all coverages combined. Some plans, such as the Delaware FAIR plan, offer personal property coverage too. FAIR plans typically do not include loss of use coverage or medical payments to others (unless the state offers a liability plan).

Conditions to be eligible for a FAIR plan

You may assume because you have a high-risk home that you are automatically eligible for access to a FAIR plan. But FAIR plans have their own set of eligibility requirements that must be met. According to the Insurance Information Institute, you may need to be willing to complete specific updates to your high-risk home. 

You may have to make improvements to your home that limit the risk of fire, theft or water damage. These types of improvements might include updating the wiring, installing new plumbing or replacing an old roof. You might be denied coverage if you fail to make these improvements. Each state has their own list of eligibility requirements.

How to get a FAIR Plan

If you’ve exhausted all your options to obtain homeowners insurance in the marketplace, then it’s time to call your state agency and discuss obtaining a FAIR plan. FAIR plans are considered a last resort since you typically receive less coverage than regular homeowner’s policy at a higher cost. You will work with the FAIR plan’s state administrator to apply for coverage and confirm eligibility requirements. 

FAIR plan contact information by state

Why choose FAIR plans?

FAIR plans are often chosen when you’ve exhausted your options. FAIR plans should be considered a last resort since they can be costly and typically do not provide the same level of coverage as a regular homeowner’s policy. 

Alternatives to FAIR plans

Before you commit to buying a FAIR plan, consider these alternatives for finding a policy:

Talk to your insurance agent

Working with an insurance agent who is knowledgeable about your home’s location is key. The agent can advise you if it’s worth making improvements or if you’re eligible for a high-risk insurance plan without having to apply for a FAIR plan.

Talk to the neighbors

If your property is in a high-risk area, it’s likely your neighbors have faced the same situation. Talk to them to find out what options they’ve used to obtain insurance.

Make improvements

If you are financially able to, making improvements to your home might increase the likelihood of getting insurance. You should explore this option after speaking to an insurance agent and determining if the improvements will help you meet the eligibility requirements of other carriers. 

The takeaway

• FAIR plans are state-mandated, shared market insurance plans designed to provide coverage for homeowners who can’t obtain insurance through the traditional marketplace.
• FAIR plans often provide less coverage and are typically more expensive than traditional homeowner’s insurance policies. 
• FAIR plans vary in the amount of coverage and liability limits from state to state. To apply, you must work with your state’s administrative office and meet requirements for improving your home.

If you live in a high-risk area where your home is subject to perils that are out of your control, or if you or your home do not meet the eligibility requirements of other insurance carriers, a FAIR plan may be your last resort for obtaining homeowners insurance. Many states offer a FAIR plan, but coverage amounts and covered events differ from state to state.