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California FAIR Plan wildfire insurance

California is often referred to as “The Golden State,” but with the frequency of fires, it wouldn’t be surprising if we took on the label of “The Wildfire State.”

With each fire, home insurance carriers take devastating financial hits; this can cause them to reevaluate rates, policy coverages and future insurability throughout the state.  While most insurance companies no longer cover homes in California high fire risk areas, California Fair Plan (CFP) provides property owners an option.  CFP offers policies for primary residences, second homes, income properties, vacation rentals, condos, vacant properties, commercial properties, and properties under construction.

California Fair Plan will not deny coverage if your home is in a high fire risk area or if you’ve had numerous claims.  This is a huge financial undertaking for an insurance carrier.  They are not the cheapest insurance around; however, they offer home and fire insurance policies when other companies decline…and respond to claims quickly.  All other CA insurance carriers have firm brush and wildfire zone restrictions when it comes to a home’s eligibility to be insured.  In most cases, it doesn’t matter if you have a fire-retardant roof, water tanks all around your property, a full sprinkler system or if you’ve been a client for decades; if your property is located in a “high fire risk” area, most traditional insurance companies won’t insure your home.

With California wildfires occurring more often, the resulting damage is more destructive than ever.  Unfortunately, there is minimal wildfire relief in sight.  Wildfires in fire prone areas (known as the Wildland Urban Interface – WUI), are expected to continue and get worse.

In response to the recent needs of property owners in California, CFP has made changes to their policy which can greatly benefit California property owners.  These changes take effect in January 2021.

Before discussing the changes to the California Fair Plan policy, let’s review…


A CFP policy can cover your property if damaged by the following perils: Fire, Wildfire, Lightning, Internal Explosion, Smoke, Wind, Hail, Riot, Vandalism, Malicious Mischief, Aircraft, and Vehicles.  A peril is an occurrence which causes a loss.

Until recently, the maximum amount of TOTAL coverage offered was $1,500,000 (when adding up all the coverage limits on the policy).  Now, with proper photos, documentation and Underwriting approval, California Fair Plan will insure homes up to $3,000,000 total. 

The basic coverages on a California Fair Plan policy are:

  1. Dwelling: Coverage to replace or rebuild damage to your home’s structure.
  2. Other Structures: These are items not attached to your home (i.e. pool, gazebo, pump house, detached garage/shed/granny flat/workshop, water tank, gate around property, retaining wall, hardscape, built in BBQ/firepit, water feature, etc.  CFP’s policy also requires you to line itemize coverage for fences and decks (even though a deck may be attached to your property).
  3. Personal Property: This is your “stuff/possessions” (i.e. clothing, furniture, TV’s, computers, bathroom items, kitchen items, appliances, bicycles, toys, etc.).  This does not include high value specialty items (i.e. jewelry, artwork, etc.), your cars, jet skis, RV’s, Boats nor Trailers.
  4. Fair Rental Value aka Additional Living Expenses aka Loss of Rent:  If your property isn’t fit to live in due to a covered loss, this coverage helps with the cost to live elsewhere.  If your property is a rental, this coverage helps with lost rent while your property isn’t livable.  In the past, CFP offered a maximum of 20% of the dwelling amount for this coverage; currently, they offer a maximum of 50% of the Dwelling (see the description below in the next section).
  5. Ordinance or Law:  Coverage for additional construction costs to bring your house up to current building codes.  For example, if your property was built in the 70’s, it will need to be built to comply with current building requirements (i.e. interior sprinklers, boxed eaves, fire retardant roofs, abs pipes, etc.) that didn’t exist when it was originally built.  CFP offers a maximum of 10% of the dwelling amount for this coverage.
  6. Debris Removal: Covers the cost to remove debris so you can repair/rebuild your property.  A policy allows up to 5% of all coverages combined. For example, if you have $300,000 in Dwelling coverage, $50,000 Personal Property coverage, $60,000 Fair Rental Value coverage, and $30,000 Ordinance or Law coverage, you could get up to $22,000 in Debris Removal coverage ($300,000 + $50,000 + $60,000 + $30,000 = $440,000.  $440,000 x .05 = $22,000).

Learn MoreHow To Make A Wildfire Evacuation Checklist


The following 3 CFP policy coverage changes that will take place in 2021:

  1. Higher Deductible Options of $15,000 and $20,000.
  2. Extended Dwelling Coverage of 25%.
  3. Increase in Fair Rental Value (Additional Living Expense) limits.

A little more on these 3 changes…

1. Higher Deductible Options: $15,000 & $20,000
Every home & fire insurance policy has a deductible that is applied at the time of a covered loss. Until recently, deductibles available on a California Fair Plan policy were $100, $250, $500, $1,000, $2,500, $5,000, $7,500 and $10,000. The higher the deductible, the lower the premium.  A $15,000 and $20,000 deductible option is now available.  We often speak with property owners that feel their home is not at high risk for fire damage, yet insurance carriers disagree.  This can be extremely frustrating for a homeowner.   If you think the odds are low that you’ll incur damage from one of these perils, you may want to consider a higher deductible to lower the cost of insurance. Remember, a California Fair Plan policy covers damage from Fire, Wildfire, Lightning, Internal Explosion, Smoke, Wind, Hail, Riot, Vandalism, Malicious Mischief, Aircraft and Vehicles.  The #1 reason for home insurance claims is due to water damage; this is not covered on a CFP policy.  If you’d like coverage for water damage, liability, theft and falling objects, a supplemental policy (known as a Wrap-Around or Difference in Conditions – DIC policy) is available.  On a DIC policy, you can choose a lower deductible.

2. Extended Dwelling of 25%
Home insurance companies use a valuation method to determine how much to pay a policy holder at the time of a loss.  Until now, California Fair Plan has either paid the policy holder based on two valuation methods: REPLACEMENT COST or ACTUAL CASH VALUE.  With a REPLACEMENT COST policy, if your home is damaged and the loss is covered on a California Fair Plan policy, you’ll receive compensation at your home’s current replacement cost up to the policy limits.  However, if your home is underinsured or if your roof is over 25 years old, the payout on a CFP policy is ACTUAL CASH VALUE or the depreciated value of your property; the older the property, the lower the value.

In January 2021, California Fair Plan is offering a 25% Extended Dwelling Coverage option.  For example, if your CFP policy includes $500,000 in Dwelling coverage and you choose to have this 25% Extended Dwelling Coverage, your policy will offer a maximum of $625,000 ($500,000 x 1.25 = $625,000) in the event of a loss…if the initial $500,000 Dwelling coverage isn’t sufficient to rebuild your home. Extended Dwelling Coverage is an extra cushion that most traditional home insurance policies offer.  There is a cost to add this coverage, and the total coverage (including the extended dwelling coverage) cannot exceed $3,000,000.

Learn MoreWhat Is Home Hardening?

3. Increased Coverage – Fair Rental Value
Most traditional home insurance policies refer to this coverage as “Loss of Use” or “Additional Living Expenses”.  California Fair Plan calls this coverage “Fair Rental Value”. 

Whether you live in the property as your primary residence, use it as a 2nd home, or rent it out to a tenant, Fair Rental Value provides compensation while the property isn’t livable due to a covered loss.  For example, if the home is your primary residence and you need to live elsewhere while the home is being rebuilt, Fair Rental Value assists to provide money allowing you to maintain your usual lifestyle.  The coverages will pay out until your home is livable or the coverage limit runs out (whichever comes first).  If you are a landlord and your property can’t be lived in, Fair Rental Value compensates you for rental income.

Up until 2021, California Fair Plan provided Fair Rental Value up to 20% of the dwelling amount.  Thus, if you have $200,000 of dwelling coverage, you could get $40,000 in Fair Rental Value.  When a devastating fire occurs, many homes in a dense area can be lost.  There are only so many contractors and resources in that area which can result in the rebuild taking much longer than anticipated.  In a situation of low supply and high demand, what would normally take a year, may turn into years when contractors, building inspectors, plumbers, electricians, framers, painters, fabricators, etc. are limited.  To make up for longer construction times/delays, CFP now offers up to 50% Fair Rental Value coverage (this would be $100,000 in this paragraph’s example).

If you are looking for an insurance agency with vast experience with California Fair Plan policy, please contact Einhorn Insurance.  We assist hundreds of property owners throughout California thru the California Fair Plan and have claims experience.  Our clients are happy and grateful for this insurance option. For a quote or more information, please visit Einhorn Insurance’s Wildfire Insurance page, click the GET A QUOTE button above, or call 619-313-4643.

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