California homeowners face a significant risk of fire damage, as the state has experienced frequent and severe wildfires in recent years. Although standard homeowners insurance covers such damage, property owners might need additional coverage options in higher-risk areas. We at the MarketWatch Guides team will explain insurance challenges in such locations, the FAIR plan and other relevant details in this guide.
Does Standard Home Insurance Cover Wildfires?
Most standard homeowners insurance policies provide coverage against fire and wildfire damage, with fire typically listed as a covered peril. If your property is damaged by fire, your insurance provider can pay for the cost to repair or rebuild your home, and to replace your personal property, depending on your policy limits.
However, it’s important to understand that a standard policy typically will not cover damages to outdoor structures such as fences, pools or landscaping unless specifically mentioned in your insurance contract.
Also, if your property is located in an area at particularly high risk of wildfires, insurance companies might charge higher premiums, institute a higher deductible or not offer coverage at all. Californians in this situation might need to purchase a separate wildfire insurance policy for comprehensive protection.
Growing Insurance Challenges in High-Risk Areas
Some California residents have faced significant challenges regarding finding quality, sufficient and affordable coverage in recent years. Due to the increasing cost of claims and high fire risk, several players in the insurance industry have raised rates or opted for policy non-renewal in the state’s most wildfire-prone regions.
As a result, homeowners in high-risk areas may turn to alternative sources of coverage. One alternative option is the FAIR plan, which serves as a last resort for those unable to get traditional home insurance coverage.
Using the California FAIR Plan as Last Resort Coverage
The FAIR plan offers insurance for homeowners in California who are unable to get coverage through the standard insurance market. Coverage is generally limited compared to traditional property insurance, as it offers protection against fire and smoke damage but does not cover theft, liability and water damage.
Policyholders needing more coverage can also purchase a separate Difference in Conditions (DIC) policy from a private insurer. This policy can supplement FAIR plan coverage and bridge the gaps by including other risks. However, due to higher associated risks, the FAIR plan generally has higher insurance rates and deductibles than standard policies.
This plan is not supported by the California Department of Insurance but rather by the state’s private insurers. You can apply for the FAIR plan only if you can demonstrate that you have been unable to secure coverage through other insurers. Your property must also be insurable and meet some specific occupancy requirements.
How To File a Fire Damage Claim
Before filing a fire damage claim, property owners should thoroughly document the damage, which can involve taking pictures and videos of affected areas, such as the interior and exterior of the property. It’s important to capture pictures of damaged personal property, structural elements and other items — as this can help you keep a clear record of the extent of the damage.
It is also recommended to only make essential temporary repairs. For instance, you might need to board up broken windows to prevent vandalism. If you make repairs, keep a receipt for the expenses incurred, as your insurance provider might offer reimbursement. It’s important not to make permanent repairs until after the adjuster has inspected the damage.
When your insurer assigns an adjuster to visit your property, you can provide them with all the documentation, including pictures, videos and receipts. Being transparent can assist in accurate assessment and fair settlement.
It’s also important to review your insurance policy and understand your coverage limits, deductibles and other requirements when filing a claim. You can contact your insurance agent to understand the necessary details.