FAIR Plan Plus DIC or a Standard Landlord Policy: Insuring an Auburn Rental

Two routes to insuring the same foothill house

Owners of older homes in the foothills often hear the same thing at renewal: the current insurer will not continue, and the broker mentions the FAIR Plan. Before you switch, it helps to know what you are switching between.

Route one is a dwelling or landlord policy from a regular insurer, bought through an agent or broker. Route two is the California FAIR Plan Dwelling policy, which covers 1-4 unit homes rented to a tenant for at least a year (and seasonal rentals of less than a year), usually paired with a DIC policy from a private insurer.

The FAIR Plan describes itself as a temporary solution for owners who cannot buy coverage from a traditional insurer, and as the state's insurer of last resort. It points owners to a licensed broker, and not every broker is registered to work with it. The FAIR Plan also suggests asking more than one broker, since some can find coverage through other insurers that is broader than its own.

What the FAIR Plan pays for, and what it leaves out

The FAIR Plan Dwelling Fire Policy is a named-peril policy: it pays only for the causes of loss it lists. Those are fire and lightning, internal explosion, and smoke. Vandalism and malicious mischief are optional at extra cost.

The California Department of Insurance says the FAIR Plan offers limited coverage for fire and smoke damage, so owners need an additional policy for water damage, liability and other risks. A difference-in-conditions policy fills that gap with coverage such as water damage, theft and liability. The FAIR Plan does not sell DIC policies; the Department keeps a list of private insurers that offer a DIC built to pair with a FAIR Plan policy.

Lost rent deserves its own question. The FAIR Plan's sample Dwelling policy has a Fair Rental Value section that can pay when a covered loss makes the rented part of the home unfit. Whatever route you take, ask how your policies handle rent you cannot collect while repairs happen.

Flood is a separate purchase on either route. The Department notes that homeowners and renters policies generally do not cover flood, and the FAIR Plan suggests flood or earthquake policies to fill those gaps.

When a renewal notice says no

A nonrenewal letter is not a reason to panic, and it comes with rules. Under Insurance Code 678, an insurer must send a nonrenewal notice at least 75 days before the policy expires, with the specific reasons and a phone number for questions. If the notice is late, the existing policy stays in effect for 75 days from the date it was sent. The notice must also point you to the Department's Home Insurance Finder, the FAIR Plan and DIC policies.

After a declared wildfire emergency, Insurance Code 675.1 bars an insurer, for one year, from canceling or refusing to renew a residential property policy in a ZIP code within or next to the fire perimeter based solely on the fact that a wildfire occurred there. That covers policies on homes of up to four units.

• Read the stated reasons and ask the insurer whether a fix, such as roof work or clearing, would change the answer.
• Ask your broker to shop regular insurers first, using the Department's Home Insurance Finder for companies writing in high-risk areas.
• Treat the FAIR Plan plus DIC as the fallback, and line it up before the old policy ends so coverage never lapses.
• At every renewal, review the dwelling limit. The Department's residential guide notes that replacement cost and actual cash value policies pay out differently after a loss.

Mitigation that insurers must reward

Under the Department's Safer from Wildfires regulation, insurers must give wildfire safety discounts for listed mitigation steps. The list includes a Class A roof, a five-foot ember-resistant zone including fencing, ember-resistant vents, enclosed eaves, upgraded windows, cleared space under decks, sheds moved at least 30 feet away, defensible space compliance, and community programs such as Firewise USA.

The FAIR Plan offers its own wildfire hardening discounts on Dwelling Fire policies, up to 12 in all, applied to the wildfire portion of the premium. The work itself is covered in our wildfire season prep post. What matters here is proof: dated photos, invoices and inspection reports. Auburn Fire lists insurance agency requests among its inspection services, and the yard tasks in your lease decide who keeps that proof current (see who clears the brush).

Your tenant's belongings are a separate policy

Neither route covers your tenant's things. The Department's residential insurance guide tells renters plainly that the landlord does not insure their personal property, and that a renters policy covers contents, loss of use and personal liability. The FAIR Plan also sells renters coverage for tenants who cannot find it elsewhere.

Every residential lease signed since July 1, 2018 must carry the notice in Government Code 8589.45 stating that the owner's insurance does not cover the tenant's possessions and recommending renter's and flood insurance. Some owners go further and make renters insurance a lease requirement; if you do, say so before the tenant applies.

When a fire does reach the property, the tenancy questions (rent during an evacuation, cleanup, a destroyed unit) are in after a wildfire or evacuation. If you would like help pulling together the photos, reports and upkeep records a broker asks for, talk with SPMG.