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Home insurance goes a long way toward protecting your finances from potential risks like damage to your property, theft and liability claims, but for millions of homeowners, coverage isn’t easy to obtain. Getting approved for traditional home insurance can be challenging if you have a history of claims or live in an area that is at high risk of damage, for example. If you are refused a standard policy, applying for a FAIR plan may be the best solution.
fair plan insurance explained
FAIR Plan, which means Fair Access to Insurance Requirements, is a program that allows high-risk homeowners to purchase home insurance. People who obtain insurance through the FAIR plan are generally not eligible for coverage through the standard home insurance marketplace because their home is located in a high-risk area or has other red flags that worries insurers.
FAIR plans are state-run programs that are subsidized by taxpayers and private insurance companies. Fair plan is slightly different from a normal home insurance company as it is a common market plan. Instead of getting coverage from a single insurance company, many insurance companies cover your property in a FAIR plan, which limits the amount of risk a company can assume. If you have to file a claim, each participating company pays for a portion of your damages.
When it comes to the actual coverage, home owner’s insurance through Fair Plan is quite limited. Many plans may only include coverage of dwelling and personal property, depending on the named perils. Most likely you cannot obtain liability, medical payments or loss of use coverage through a FAIR plan.
It is important to note that FAIR insurance is only used as a last resort. You cannot apply for home insurance through your state’s FAIR plan as your first option because you must prove that many private companies have denied you home insurance.
High-Risk Homes and Fair Plans
Fair plans specifically cover high risk homes and owners of high risk homes. However, the criteria for what is considered a high-risk home is very specific. Here are some characteristics of a high risk home that may qualify you for FAIR plan insurance:
You live in an area with a high risk of severe weather, such as tornadoes, hurricanes or earthquakes.
You live in a neighborhood with a high rate of crime, vandalism or theft. It is usually more common in urban areas.
Your home is very old and has outdated systems that make it too risky to insure, such as old plumbing or electrical wiring.
FAIR plans also serve homeowners with long claims histories. If you have filed more than a few insurance claims, especially large claims, it can be a red flag for insurance companies. When you apply for a new policy, the insurance company may review your Comprehensive Loss Underwriting Exchange (CLUE) report, which includes a record of insurance claims you’ve filed. A spotty claims record can make it difficult to obtain preferred coverage, so you may need to resort to a FAIR plan if you fall into this category.
Although you may be able to find private insurance companies willing to insure high-risk homes, it is becoming more difficult in some states. For example, many home insurance companies in Florida are closing and canceling policies due to an increase in natural disasters, costly claims payments, and fraudulent claims. Therefore, more Florida homeowners may need to consider a proper plan due to the difficulty of finding standard coverage.
How to Get Fair Plan Homeowners Insurance
The process for obtaining FAIR insurance varies from state to state, but is generally straightforward.
Call your state’s insurance department to inquire about the FAIR plan. Explain your situation to find out if you qualify for coverage. You may also be able to call a local agency who can also provide quotes and facilitate the buying process.
If you qualify, you will be assigned an agent with whom you will need to file an application with additional details about yourself and your property. With your application, you may also need to provide proof of denied coverage from one or more private providers. This is also the step where you will note the coverage limits being requested.
Once you submit the application, you will wait for approval. You may be required to pay to initiate your policy until your coverage is billed to your mortgage escrow account.
Keep in mind that some states require that FAIR homeowner insurance customers apply for private home insurance once a year. If approved, you will no longer be eligible for FAIR Plan insurance.
States That Offer FAIR Plan Insurance
Not every state offers a FAIR plan, but many do, especially states with high rates of severe weather. As of 2021, the most recent year with available data, 30 states and Washington DC offer a reasonable plan for high-risk homeowners.
Frequently Asked Questions
How much does FAIR Plan insurance cost?
Fair plans are generally more expensive than standard home insurance policies. If you are eligible for an appropriate plan, it means that you or your home is considered high risk to be insured. To compensate, the insurance company charges you more money for the insurance to cover the potential risk.
The actual cost of home insurance from a FAIR plan depends on a number of factors, most of which are still the same when you buy standard home insurance. Some examples include your state, zip code, age of the home, your credit-based insurance score, and your claims history.
CAN I STAY ON FAIR PLAN INSURANCE FOREVER?
depends on. Many states require people with FAIR plan insurance to apply for private coverage at least once per year. If you’ve been on the plan for a while, the insurance company can work with you to renew or update the plans that will allow you to qualify for private insurance.
If you have FAIR homeowner insurance because your home is located in a high-risk area, such as on a beach, it may be possible to stay on a FAIR plan for as long as you own the home.
WHAT COVERAGE IS INCLUDED WITH FAIR PLAN INSURANCE?
One drawback of FAIR plan insurance is that the coverage is limited. Most FAIR plans only include dwelling coverage, which protects the structure of your home, as well as personal property coverage. This means you may not be able to obtain liability, medical payments or loss of use insurance.
Additionally, your home and belongings are usually covered by actual cash value with FAIR plan insurance, meaning that if you file a claim your payment will include depreciation. Some insurance companies sell advertising, such as the option to upgrade to replacement cost coverage, but this varies.
ARE DISCOUNTS AVAILABLE FOR FAIR PLAN INSURANCE?
Most insurance companies offer home insurance discounts to policyholders looking to save money. But unfortunately, you generally may not qualify for a discount with the FAIR plan. However, there are other ways to potentially save money on your premiums. For example, you may be eligible for a lower rate if you improve your credit score, make security-related home improvements or increase your deductible.