The FAIR Policy in Marin County

The home insurance landscape in Marin County is changing rapidly. What was once a difficult property market to insure, has lately become much more difficult.

One avenue that is often suggested is the FAIR plan. The California FAIR plan "provides insurance as a last resort, and should be used only after a diligent effort to obtain coverage in the voluntary market has been made." CFPNET.

Many consumers are confronted with the need for a new policy after receiving a non-renewal notice from their home insurer. In fact many non-renewal notices contain a reference to the California Fair Option.

However the FAIR option is not a typical insurance policy and consumers need to understand these vastly paired down products:

The Fair plan ONLY covers your home for "Fire or Lightning, Internal Explosion, Smoke." And a few optional coverages as well: "Extended Coverage (windstorm or hail, explosion, riot or civil commotion, aircraft, vehicles and volcanic eruption) and Vandalism or Malicious Mischief."

There are dozens of coverages MISSING from this (that are on normal home policies) including (but not limited to): Water Damage, Theft, and Liability. In addition there are dozens of other minor coverages that most consumers have come to expect such as identity theft.

[There are of course numerous things that are not listed that are not covered by any home insurance policy, just to be clear.]

In all the FAIR plan at best is a partial insurance option. It can be combined, sometimes with something known as a DIC or Wrap plan that work in conjunction with each other to provide better coverage. In this proposed solution you would actually have TWO home insurance policies.

The FAIR plan though has serious issues for Marin County residents. One of which is that its current maximum of insurance is $1,500,000. That is the maximum amount of coverage for the entire policy, not just the building. Many homeowners in this county require total insurance coverage (Building, Personal Property, etc) of $2,000,000 or $3,000,000. A limit of $1.5MM is often just half of what these people need.

This leaves homeowners with a tough position to be in. Should they opt for the California FAIR/ DIC combo plan with a max of $1.5MM and just go underinsured or should they opt for a much more expensive Surplus Lines Policy through the likes of Lloyds of London, assuming they can even get a quote from them?

Sadly this scenario is playing out almost daily in Marin County at this time. I hope things change in the new year.

Scott W Johnson is the Owner and Manager of Marindependent Insurance Services LLC of Mill Valley California. He is a licensed insurance agent and broker in the state of California.