The California FAIR Plan, which provides basic fire insurance to California property owners unable to obtain private insurance, has filed a proposal to increase insurance rates by 35.8%. If approved, this rate hike would begin April 1, 2026, making it the program’s largest rate increase in seven years.
The California FAIR Plan alone only covers fire-related damages, which is why it’s often coupled with a Difference in Conditions (DIC) Policy to cover water damages, theft, etc. According to a FAIR spokesperson, as of 2022, the average cost of the premium plan is around $3,200. That’s over double the cost of the average home insurance plan in California.
A spokesperson from the program claimed catastrophic disasters like wildfires are the biggest reason for the rate changes, according to the LA Times. As the plan isn’t covered by taxpayer dollars and instead backed by private insurance companies in the state, growing wildfire risks have caused many insurers to leave the market. Policyholders in areas most prone to wildfires like Sierra Nevada and Sonoma County will be primarily affected, while rates could drop for those in areas like the Central Valley, according to the San Francisco Chronicle.
“The FAIR Plan is working closely with the California Department of Insurance to ensure its rates reflect the current risk portfolio, expenses and growth as the state’s insurer of last resort,” said FAIR spokesperson Hilary McLean.
The FAIR Plan has estimated around $4 billion in losses from the fires earlier this year in Altadena and Pacific Palisades, which caused up to $131 billion in damages and destroyed over 15,000 buildings.
Extreme weather events, at least partially driven by climate change, have caused these disasters to increase all over the country, driving up insurance premiums in states from Colorado to Florida.
The FAIR Plan is offering potential discounted rates for policyholders that take measures to protect their properties from wildfires: installing fire-resistant roofing, maintaining lawn care, constantly clearing the home’s gutters and more. California Insurance Commissioner, Ricardo Lara, has the power to reduce the rate hike.
