A recent bulletin from the California Department of Insurance reveals a critical update that affects homebuyers, property owners, and real estate investors alike. If California’s FAIR Plan, the state’s insurer of last resort for wildfire insurance, runs out of money following a catastrophic wildfire, it could charge a surcharge to all policyholders, even those whose properties weren’t damaged.
This change has serious implications for anyone buying, owning, or investing in real estate in California, especially in wildfire-prone regions.
What Is the FAIR Plan?
The California FAIR Plan provides insurance to property owners who are unable to get coverage through traditional insurers due to wildfire risk. The plan is backed by all major insurance companies operating in California, including State Farm and Allstate.
Under the newly clarified terms:
Insurers are responsible for 50% of wildfire-related losses up to $2 billion.
The remaining 50% can be recovered from policyholders in the form of a surcharge, with the approval of the Insurance Commissioner.
That means even if your property is untouched by a wildfire, you could still receive a surcharge to help cover broader state losses.
Why This Matters to Our Clients
If You’re Buying a Home:
When you're getting ready to purchase a home, especially in a high-risk fire zone, your lender may require proof of wildfire insurance before finalizing the deal. If the FAIR Plan is the only available option, your monthly costs could be higher than expected. And future surcharges may increase your expenses even more.
If You Already Own a Home:
You may be covered under the FAIR Plan without even realizing it. Regardless of where your home is located, a statewide surcharge could still apply, even if you're outside a wildfire zone.
If You’re Planning for the Long Term:
Wildfire insurance costs and limited policy availability can affect your long-term budgeting and property value. This latest change adds complexity for anyone thinking about refinancing, remodeling, or using their home as an investment property.
What You Can Do Now
1. Check Your Wildfire Risk
Use tools like CAL FIRE’s Fire Hazard Severity Zone map to see if your current or future home is in a wildfire-prone area.
2. Review Your Home Insurance
If you're covered under the FAIR Plan, review what it does, and doesn’t include. Liability, theft, and water damage may not be part of the base policy unless you add supplemental coverage.
3. Budget Proactively
Surcharges and rising premiums could increase your monthly or yearly housing costs. If you’re thinking of buying soon, factor this into your financial planning.
4. Consider Location as a Factor
Looking at homes in lower-risk areas might reduce your insurance costs and long-term exposure to policy changes.
5. Ask Your Scout Realty Agent
Our experienced team can walk you through how these insurance shifts may affect your purchase or current property. We stay on top of real estate trends, so you don’t have to.
How Scout Realty Supports You
At Scout Realty, we help buyers, homeowners, and investors navigate every step of California’s unique property market. With wildfire insurance costs and regulations evolving quickly, it’s essential to work with a real estate partner who understands the full picture.
When you work with us, we’ll help you:
Understand how wildfire risk impacts your total cost of ownership
Find homes that meet both your lifestyle and insurance expectations
Prepare for lending and closing with the right information upfront
Make confident decisions that align with your short- and long-term goals
Let’s Talk About Your Next Move
California’s wildfire insurance landscape is changing fast. Whether you're planning to buy your first home, upgrade your current space, or expand your real estate portfolio, Scout Realty is here to guide you.
Reach out today for a personalized consultation. We’ll help you stay informed, prepared, and one step ahead, no matter where you are in your real estate journey.
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