What Is FAIR Plan Homeowners Insurance?

What is FAIR Plan insurance?

A Fair Access to Insurance Requirements, or FAIR, plan is a state-managed program designed to connect homeowners with insurance coverage that they may otherwise be unable to purchase on their own. These programs are individually created and managed by each state government. Taxpayers often subsidize them, though the FAIR plans don’t directly sell or underwrite insurance coverage to consumers.

To buy an insurance policy, you need to shop around for the coverage that suits your needs. This usually means starting your search with traditional insurance companies in the private marketplace. After finding the right coverage, you need to qualify for coverage from that insurer, based on factors such as your claims history, your location, and even your credit score.

But approval isn’t guaranteed, regardless of how much you need that policy or even if your lender requires you to maintain coverage. You may find yourself denied by multiple insurance companies and unable to find adequate coverage at an affordable price.

That’s where a Fair Access to Insurance Requirements, or FAIR, Plan may come into play.

With FAIR Plan insurance, people who have been denied coverage in the standard insurance market can access special insurance policies from a pool of private insurance companies. Participating insurers in this pool share the burden of issuing policies to high-risk homeowners and paying out subsequent claims. They also split any recognized profits from that consumer pool.

Unlike traditional homeowners insurance policies, FAIR Plans may be more limited in terms of the coverage they offer. They’re often more expensive than traditional policies, as well.

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Who needs FAIR Plan insurance?

FAIR Plan insurance is intended for homeowners — and in some states, business owners — who have been denied coverage in the standard marketplace.

People may be denied insurance coverage for a number of reasons, including:

• Poor claims history, including too many previous claims

• Living in an area that’s at a high risk of natural disasters, such as hurricanes or tornadoes

• Owning an older or outdated home with certain high-risk qualities, like very old plumbing or a bad roof

  

What does FAIR Plan insurance cover?

Each state’s FAIR Plan is a bit different, and the coverage participating insurers will offer you can also vary.

For example, the Pennsylvania FAIR Plan has basic property insurance coverage that only protects your dwelling against fire- or lightning-related loss. If you want protection against other perils, you’ll need to purchase additional coverage.^[1]

If you buy a FAIR Plan in Indiana, you’ll be limited to a maximum of $250,000 in residential coverage, which includes both the dwelling and your personal belongings.^[2] In West Virginia, a standard FAIR Plan only covers fire damage, though you can add additional perils (excluding vandalism).^[3] And in Texas, FAIR Plan policies don’t cover falling objects, like tree limbs, or damage due to freezing.^[4]

This differs from traditional homeowners insurance coverage, such as an HO-3 policy, where a number of perils typically receive coverage under the standard policy.

Often, standard policies cover damage caused by:

• Fire

• Wind

• Hail

• Lightning

• Electrical surges

• Riots or civil unrest

• Vandalism

• Burglary

• Leaks and broken water pipes

You may be able to purchase traditional coverage for perils like earthquakes, floods, and even water damage, too. And with traditional policies, coverage for your personal property (furniture, clothing, etc.) is often included.

Traditional policies, purchased through the standard market, will also offer higher maximum coverage options, depending on your home’s value and the coverages you choose. So when buying through a FAIR Plan, expect to be more limited in your property protection options.

How to qualify for a FAIR Plan policy

FAIR Plans aren’t accessible to everyone and are only intended as a last resort for those who can’t otherwise purchase coverage.

To purchase a FAIR Plan, you’ll usually need to show proof that you’ve already been denied coverage by multiple insurers. Each state has its own limits: In Indiana, you’ll only qualify if you’ve been denied by three or more unrelated insurers, while in Texas, you just need to be denied by two.^[2],^[4]

Some plans are limited to specific property types, such as single-family homes or multi-family properties with less than four units. Certain plans and carriers may require you to make certain improvements or repairs to the home, especially if you have outdated wiring or plumbing that could result in a covered issue.

Lastly, in order to qualify for a FAIR Plan policy, you usually can’t have any outstanding tax liens or open insurance claims on the property.

States that offer FAIR Plan homeowners insurance

There are currently 32 states, plus the District of Columbia, offering a FAIR Plan for homeowners insurance. Here’s a look at the ones that offer this access to coverage.

FAIR Plan insurance pros and cons

While buying homeowners insurance through a FAIR Plan may feel like a last resort, you should keep in mind these advantages and disadvantages.

How to get homeowners insurance in a high-risk area

You might find it difficult to buy homeowners insurance coverage for many reasons, such as too many previous claims, an outdated property, existing tax liens, or living in a high-risk area.

High-risk areas are prone to storms, such as tornadoes, hurricanes, wildfires, or other natural disasters. To limit losses, private insurance companies may charge exorbitant premiums or deny policies to many applicants, leaving you wondering how you might find coverage for your home.

One option for getting homeowners insurance in a high-risk area is to work with a broker. Brokers can shop your coverage needs around among a network of carriers, some you might not even be aware of. If you have other policy needs — such as auto insurance or life insurance — a broker may also be able to help you bundle your coverage and save money.

Another option is to turn to your state’s FAIR Plan or, in some states, a Beach Plan or Wind Underwriting Association. Depending on where your state is and the perils that threaten your home the most, these programs can give you access to coverage regardless of where you live. Just understand that the purpose of these programs is to put insurance coverage in your hand, not to find you the cheapest possible rates.

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