Understanding the Increase in FAIR Plan Commercial Coverage Limits

The California Department of Insurance recently approved significant changes to the FAIR Plan, the state’s insurer of last resort. These updates directly impact commercial coverage for homeowners associations, condo associations, farms, and various types of businesses. With increased coverage limits and broader implications for those needing insurance in California, particularly in wildfire-prone areas, the updates to the FAIR plan are a helpful way for agents to better serve their customers.

You can see the official announcement here.

New Coverage Limits

Effective no later than November 1, 2023, for its Commercial Property Program, and December 14, 2023, for its Business Owner’s Program (BOP), the FAIR Plan will now offer increased commercial coverage limits up to $20 million per location. This change comes in response to the challenges many Californians face in acquiring adequate insurance coverage, particularly those situated in high-risk wildfire areas.

Implications for Policies Renewing Before Implementation Dates

If a policy is due for renewal before the effective dates for these increased limits, there’s good news. The FAIR Plan has set forth clear guidelines for transition:

  • No Additional Administrative Costs – Upgrading to a higher-limit policy will not incur any additional administrative fees.
  • Inspection Requirements Waived – There will be no need for new photographs or inspections when switching to a higher-limit policy.
  • No Coverage Gaps – The FAIR Plan commits to keeping your existing policy active until they are certain the new, higher-limit policy can be issued, preventing any lapse in coverage.

Insurance Commissioner Ricardo Lara has also reached an agreement to increase insurance writing in wildfire-distressed locations. Specifically, commercial coverage limits are set to increase again, up to $20 million per building, to offer consumers more robust temporary coverage options.

What is the FAIR Plan?

For over half a century, the FAIR Plan has served as an essential insurance option for California residents and businesses. Although the FAIR Plan operates under private governance, it is overseen by the California Department of Insurance, ensuring that it continues to meet the changing insurance needs of the state’s residents and businesses.

The FAIR Plan remains a critical safety net for California businesses and property owners struggling to find insurance through the standard market. These newly increased coverage limits reflect the evolving needs and risks facing Californians, particularly those in wildfire-affected regions. For agents that offer commercial insurance, staying up to date with the FAIR Plan can help your clients describe and understand their policies better. It may also be a way to help those that have reached out in the past expressing concern over their commercial coverage options.

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