What Is the California FAIR Plan—and Why You Might Need It

As wildfires continue to intensify across California, many homeowners are discovering a harsh reality: traditional home insurance carriers are pulling out of high-risk areas or denying renewals altogether. If you’ve been affected, or fear you could be, there’s a safety net in place—the California FAIR Plan. But it’s important to understand that while this plan fills critical gaps, it doesn’t provide full coverage on its own.

Let’s break down what the FAIR Plan is, what it covers, and how a companion policy called a Difference in Conditions (DIC) policy helps provide complete protection for your home.

What Is the California FAIR Plan?

The California FAIR (Fair Access to Insurance Requirements) Plan is a state-mandated insurance program created to ensure basic fire insurance is available to homeowners who can’t obtain coverage through traditional insurance markets due to wildfire risk or other factors.

It’s a last-resort policy—not a full homeowners insurance policy. Here’s what it typically covers:

• Fire and smoke

• Lightning

• Internal explosion

• Vandalism (optional)

• Limited liability options (add-ons, not default)

It does NOT cover:

• Water damage (e.g., burst pipes)

• Theft

• Personal liability

• Loss of use

• Earthquake

• Windstorm (except in certain areas)

In essence, it only provides named-peril fire coverage—which is where a DIC policy comes in.

What Is a DIC (Difference in Conditions) Policy?

A DIC policy is a wraparound policy purchased from a private insurance company. It’s designed to fill in the gaps left by the FAIR Plan so you can have the equivalent of a standard homeowners insurance policy.

It typically includes:

• Liability protection

• Water damage

• Theft and burglary

• Loss of use (temporary housing)

• Medical payments to others

• Windstorm (in some areas)

How it works:
Think of the FAIR Plan and the DIC policy as two halves of one whole. The FAIR Plan covers your home’s structure from fire and other limited perils, while the DIC policy handles everything else a typical homeowners policy would cover.

Why Is This Setup Becoming More Common?

Over the last few years, devastating wildfires—like the ones in Pacific Palisades and Altadena—have pushed the traditional insurance market to a breaking point. Insurers have been forced to reevaluate how much risk they can afford to take on. As a result, thousands of California homeowners have lost coverage.

These fires have also exhausted much of the FAIR Plan’s financial reserves. The program is funded by assessments levied on insurance companies operating in California. When losses outpace reserves—like they did in the recent fires—insurance companies are on the hook to cover the shortfall.

Here’s where it gets more concerning:

What This Means for Consumers

Because of the cost burden caused by catastrophic fires:

• 50% of the assessed FAIR Plan expenses are being passed back to insurance companies, who in turn may pass some or all of those costs on to consumers.

• This may lead to higher premiums, even for homeowners who are not directly using the FAIR Plan.

• Access to standard insurance policies may continue to shrink, increasing demand for FAIR + DIC policies.

What You Can Do

1. If you’ve been dropped by your insurer or denied coverage, ask your broker or agent about the FAIR Plan and a companion DIC policy.

2. Don’t rely on the FAIR Plan alone—it leaves out critical protections like liability and theft.

3. Work with an experienced agent who understands the FAIR + DIC structure and can ensure you’re not exposed to uncovered risks.

Final Thoughts

The California FAIR Plan exists to protect homeowners when no one else will—but it’s not a full solution on its own. As fire seasons grow longer and more intense, understanding how to properly protect your home is essential. A DIC policy wraps around the FAIR Plan to provide the comprehensive coverage you need.

And while costs are rising across the board due to wildfires and the resulting insurance market pressure, being informed and proactive is the best way to ensure your family and your home are properly protected.

Need help finding FAIR + DIC coverage?
We specialize in high-risk area insurance and can walk you through your options, step by step. Reach out today and let’s make sure you’re fully protected—no matter what fire season brings.