What should I review before replacing a California FAIR Plan policy?
Last updated
Before replacing a FAIR Plan policy, slow down and compare the details. The goal is not simply to find something different — it is to find coverage that makes sense for the property, the lender, and your risk tolerance. Review these items carefully:
Coverage limits
Does the replacement policy insure the structure for an appropriate amount? Is the replacement-cost estimate realistic, and is there extended replacement cost or only a fixed limit?
Covered causes of loss
What losses are covered, and what is excluded? Confirm how the policy treats fire, smoke, wind, theft, water damage, vandalism, liability, and loss of use.
Deductibles
Are there separate deductibles for wildfire, wind, or other causes of loss, and are they flat amounts or percentages?
Liability and water damage
Basic property coverage may not include liability, which can matter if someone is injured on the property. Water damage is also a common source of confusion — a policy may cover some sudden and accidental water damage while excluding other types, or limit it altogether.
Lender requirements and effective dates
Mortgage companies usually require acceptable property insurance, so confirm the new option satisfies lender requirements. Never cancel an existing policy until replacement coverage is approved, bound, and effective — a coverage gap can create serious financial and lender problems.
Questions to ask about any alternative
- Is this a full replacement for my current coverage or only part of the solution?
- Does this policy include liability coverage?
- Does it cover theft, water damage, or loss of use?
- Are there wildfire-specific deductibles or exclusions?
- Is the structure insured for replacement cost or actual cash value?
- Does my lender accept this policy?
- Are there inspection requirements after binding, and could the premium change after inspection?
- What would cause the carrier to decline or cancel after review?