California fair plan: High Risk Home Insurance

After the fire in 2018 that devastated Paradise the landscape of home insurance changed for everyone in the state of California. 2019 will go down as the year of non renewals from home insurance carriers all across the state. The insurance industry posted huge losses due to numerous wildfires and all the insurance companies were rushing to reduce their exposure. The result was a vacuum where there were a lot of homeowners with few or no options to insure their homes from private insurance companies. 
Historically, the California FAIR plan was always available for homeowners that either had numerous claims, or they were in locations so risky that mainstream companies just didn't want to cover them. In 2019 that all changed and the California FAIR plan became one of the most issued policies in the state. 
The good thing is that homeowners have an option. The bad news is that the FAIR plan has numerous limitations. The first major limitation is the coverage offered through the policy. There are no extended limits for dwelling coverage on the policy. There is no liability coverage option. There is no water coverage available. This meant that if you bought the FAIR plan you also needed to buy a Difference In Conditions policy through another company to add additional coverage. 
The other difficult part is the payment options. FAIR plan only takes electronic checks.  And they require a minimum of 40% down. So, if you have a 4000 policy you would be looking at 1600 cash down to start the policy. In addition you also need to pay a down payment for the secondary policy.
Here are some of the proposed changes coming to the FAIR plan in 2020:
Hopefully by the beginning of February there will be new payment options available along with the ability to take credit cards. Currently the only payment option accepted is electronic check.
At the beginning of April you may be able to get higher dwelling coverage for a home. The increase is from 1.5 million to 3 million. That may not seem like a big change, but if you have a large home that limitation can really put you at risk for paying significantly out of pocket to rebuild a home. It also might limit what size loans a bank would be willing to fund to build a home. They don't want to risk a loss where they can not recoup enough money to replace a big asset.
Beginning in June might be able to buy a policy that includes more coverage along making the policy more similar to standard home insurance. That means one policy could include liability coverage and coverage for additional types of losses beyond fire. 
These changes are a necessary stop gap measure. Without any other options in the state something needed to be done to make sure decent coverage is available for everyone.
The biggest concern is that the California FAIR plan has no competition.  Entire cities could end up being insured with one company.  If there is no competition then costs could skyrocket. California needs competition in the insurance industry.
I'm impressed that the California department of insurance was able to act quickly and come up with solutions for the current insurance crisis in the state. Now, they just need to get standard carriers back into the fold. 
If you are non renewed give us a call at 951-395-0754. We will run your fireline score and help you find the best carrier to cover your home.