Wildfires have become an increasing threat over recent years. Californians struggle to find affordable homeowner’s insurance in a tough market that has seen carriers flee the state. California fire insurance is critical insurance coverage for homeowners across the state.
After significant wildfires, the Insurance Commissioner has stepped in to stop carriers from denying coverage or non-renewing policies. Recently Commissioner Lara helped 325,000 Northern Californians keep their coverage in force by stopping insurers from canceling their policies.
Read on to learn more about recent updates to California fire insurance coverage.
California Fire Insurance Challenges Continue in 2022
With wildfire activity intensifying across much of the country, California faces mounting pressure on fire insurance. Many private insurance companies refuse to write policies in wildfire-prone areas, leaving little recourse for homeowners living in those areas. When homeowners can’t get fire insurance on the private market, they turn to the state-created FAIR plan for help.
California Fair Access to Insurance Requirements Plan
Established in 1968, the FAIR plan, also known as the California Fair Access to Insurance Requirements Plan, is a pool funded by all of the private insurers who write coverage in the state. Traditionally the FAIR plan only provided fire insurance. This meant homeowners who purchased a policy from the plan must also purchase a separate liability policy from another insurance company. This often leads to increased costs and inconveniences to policyholders.
The FAIR plan is only designed for consumers who cannot find coverage on the open market. An agent or broker must do their due diligence and try to place the policy with a private insurer. If no coverage is available, the agent or broker can apply to the FAIR plan.
The FAIR plan should be a temporary solution — a safety net for consumers until they can find coverage on the open market. Approximately 200,000 Californians rely on the FAIR Plan for their fire insurance coverage.
Recent Changes to the FAIR Plan
In September 2021, Commissioner Lara ordered the expansion of coverage under the FAIR plan. He expanded the program so that the FAIR plan will now also offer a homeowner’s policy along with its original dwelling fire coverage. The updated homeowner’s policy would give policyholders more coverage, like loss of use and water damage.
Advocates believe this will benefit consumers by making it easier and less expensive to secure the coverages they need for their homes. But insurance companies aren’t so sure, noting objections to expanded coverage. The carriers noted the intent of the FAIR plan was to be an insurer of last resort when the state developed the program.
In November 2021, Commissioner Lara took action to increase the commercial limits under the FAIR plan after ordering the plan to do so. Noting the coverage limits had not increased since the mid-1990s, Lara increased both the commercial property program and business owners program coverage limits.
In January 2022, Commissioner Lara approved another change to the FAIR plan. This change expanded coverage to commercial entities. Effective February 1, 2022, outdoor businesses like wineries, farms, and ranches will be able to secure coverage through the FAIR plan.
What’s Next for California Fire Insurance
Homeowners can expect to continue seeing changes to the status of California fire insurance policies. Commissioner Lara and the legislature have been working to make the FAIR plan more accessible and helpful to homeowners. Insurance carriers have to figure out how to provide the coverages the state has mandated. But the changes should give homeowners more access to lower-cost insurance products. And they won’t have to go to multiple insurance companies and buy separate policies.
2022 is an election year in California for the position of insurance commissioner. This is likely to cause even more changes. The incumbent, Ricardo Lara, has committed to running for re-election, which means he may be more likely to expedite changes to the FAIR plan to benefit consumers ahead of the election.
Stay tuned for more updates on the California fire insurance coverage limits and availability.
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