I’m Michael DiVita — DRE #01372066 | NMLS #241655, DiVita Home Finance (DRE #01818285 | NMLS #323700), Tiburon, CA. I’ve been in California mortgage lending since 2000 and founded DiVita Home Finance in 2007. Call (800) 239-1103.
The California FAIR Plan is the state’s insurance safety net — the option of last resort when no standard carrier will write a policy on your home. In 2025 and 2026, it has become the primary coverage option for hundreds of thousands of California homeowners in fire-risk areas. If you’re applying for a mortgage and the FAIR Plan is your only insurance option, you need to understand exactly what it covers, where its limits fall short, and what your lender will require beyond it.
What Is the California FAIR Plan?
The FAIR Plan (Fair Access to Insurance Requirements) is not a government insurance agency — it’s a private association of all admitted home insurers in California, required by state law to collectively provide basic fire coverage to any residential property that can’t obtain it through the standard market. Every licensed property insurer doing business in California participates in the FAIR Plan pool in proportion to their market share.
The FAIR Plan was created in 1968 primarily to cover urban properties in riot-prone areas that private carriers refused to insure. Over the past decade it has become overwhelmingly a wildfire risk tool, and its enrollment has exploded: from approximately 200,000 policies in 2018 to over 400,000 by 2025. In some zip codes in Marin County, the East Bay hills, and post-fire Los Angeles, FAIR Plan is now the dominant residential insurance carrier.
FAIR Plan Coverage: Exactly What You Get
| Coverage Type | FAIR Plan Basic | FAIR Plan Enhanced (Commercial Supplement) |
|---|---|---|
| Fire and smoke — dwelling | ✅ Included | ✅ Included |
| Wildfire | ✅ Included | ✅ Included |
| Lightning | ✅ Included | ✅ Included |
| Internal explosion | ✅ Included | ✅ Included |
| Other structures (garage, fence) | ❌ Not included | ✅ Available as add-on |
| Personal property / contents | ❌ Not included | ❌ Not available |
| Personal liability | ❌ Not included | ❌ Not available |
| Loss of use / ALE | ❌ Not included | ❌ Not available |
| Theft | ❌ Not included | ❌ Not available |
| Water / pipe damage | ❌ Not included | ❌ Not available |
| Wind / hail | ❌ Not included | ❌ Not available |
The FAIR Plan covers fire. That’s essentially it at the basic level. Everything a standard HO-3 homeowner’s policy includes beyond fire — liability, contents, loss of use, water damage, theft — requires either a separate wrap policy or must go uninsured.
FAIR Plan Coverage Limits in 2026
The FAIR Plan’s residential dwelling coverage maximum is $3,000,000 per property as of 2026 (increased from $1,500,000 in late 2023 in response to the scale of California’s insurance crisis). This sounds like a lot — but in the context of California real estate, the $3M cap matters in specific situations:
High-value homes: A custom home in Marin County, the Oakland Hills, or coastal Los Angeles can have a replacement cost of $3M–$6M+ even if its land value is excluded. If the FAIR Plan’s $3M cap doesn’t cover the full replacement cost of the structure, your lender may flag inadequate insurance coverage at underwriting — particularly for jumbo loans where lenders often require coverage equal to 100% of replacement value.
Lender requirements vs. FAIR Plan limits: Fannie Mae requires hazard insurance to cover the lower of the outstanding loan balance or the full replacement cost of the structure. If your loan is $2.5M and your home’s replacement cost is $2.8M, the $3M FAIR Plan cap covers both — you’re fine. If your replacement cost is $3.5M and the cap is $3M, you have a $500K gap that could create a lender compliance issue on high-end loans.
FAIR Plan Pricing: What to Expect
The FAIR Plan is not the cheapest option — it’s the only option for many buyers. Pricing is based on location, construction type, proximity to fire hazard severity zones, roof age, and the property’s brush clearance. For context on what buyers are seeing in 2026:
| Property Type / Location | Estimated Annual FAIR Plan Premium | Plus Wrap Policy (est.) | Total Annual Cost (est.) |
|---|---|---|---|
| $700K home — moderate fire zone (suburban Marin) | $2,400–$4,000 | $800–$1,500 | $3,200–$5,500 |
| $1.2M home — high fire zone (Oakland Hills, Fairfax) | $4,500–$8,000 | $1,200–$2,500 | $5,700–$10,500 |
| $2M home — severe fire zone (Malibu, Palisades adjacent) | $9,000–$18,000 | $2,000–$4,000 | $11,000–$22,000 |
| $800K condo — HOA on FAIR Plan master policy | Individual unit: varies | HO-6 walls-in policy | $1,500–$4,000 (unit coverage only) |
These are estimates for illustration. Actual premiums depend on specific property characteristics, location, and current FAIR Plan pricing schedules. Get quotes before going under contract.
FAIR Plan + Wrap: What Satisfies Most Mortgage Lenders
The standard solution that satisfies conventional (Fannie Mae/Freddie Mac) mortgage lenders is to pair the FAIR Plan fire policy with a separate wrap or companion policy that covers liability, contents, and loss of use. This combination effectively replicates an HO-3 policy across two separate contracts and two separate insurers.
Wrap policies for California fire zone homeowners are available through surplus lines brokers, specialty insurers, and companies that have specifically built products to complement the FAIR Plan. DiVita Home Finance works with insurance brokers who can place these wrap policies — which is increasingly important as fewer standard agents have access to surplus lines markets or familiarity with FAIR Plan combinations.
What Jumbo Lenders Require (Different from Conforming)
Jumbo portfolio lenders — who hold loans on their own books rather than selling to Fannie Mae — set their own insurance requirements. Many are stricter than conforming guidelines and add the following requirements that the FAIR Plan + wrap combination may not satisfy:
Admitted carrier requirement: Some jumbo lenders require coverage from an admitted California insurer. The FAIR Plan qualifies as admitted; most surplus lines wrap policies do not. If your wrap policy is a surplus lines product, some jumbo lenders will decline it. AM Best rating requirement: Some jumbo lenders require the insurer to have a minimum AM Best financial strength rating (often A- or better). Surplus lines carriers and Lloyd’s syndicates vary in their ratings — some qualify, some don’t. Replacement cost coverage: Many jumbo lenders require documented replacement cost coverage at 100% of the appraiser’s estimated replacement value — which may exceed the FAIR Plan’s $3M cap for higher-value properties.
How to Prepare for FAIR Plan + Mortgage in Escrow
Step 1 — Get insurance quotes before you make an offer. Ask your agent to confirm the property’s fire hazard severity zone designation and whether it has had prior non-renewals. Get a FAIR Plan quote and a wrap policy quote before going under contract. Know your total annual premium before you finalize your offer price and monthly payment estimates.
Step 2 — Tell your lender upfront that insurance will be FAIR Plan + wrap. Do not wait for this to surface during underwriting. Disclose it at application — your loan officer needs to confirm the lender accepts this combination and identify any additional requirements before you spend 30 days in process.
Step 3 — Work with a broker who knows your lender’s insurance requirements. DiVita Home Finance confirms with each lender upfront what their fire zone insurance requirements are, so the coverage you obtain will satisfy your lender without last-minute surprises. We also refer buyers to insurance brokers in our network who specialize in placing FAIR Plan + wrap coverage in the specific areas where we originate most of our loans.
Step 4 — Account for the actual premium in your qualifying calculations. Your monthly insurance cost is included in your DTI. Use actual quotes — not estimates — from day one to avoid qualifying surprises.
Frequently Asked Questions
What does the California FAIR Plan actually cover?
The FAIR Plan covers fire, smoke, lightning, and internal explosion damage to your dwelling. It does NOT cover personal liability, contents/personal property, loss of use, theft, or water damage. These require a separate wrap policy.
What is the California FAIR Plan coverage limit in 2026?
The FAIR Plan’s residential dwelling maximum is $3,000,000 as of 2026, increased from $1,500,000 in 2023. For high-value homes with replacement costs above $3M, this cap can create a lender compliance issue.
Can I get a mortgage with only California FAIR Plan insurance?
Generally no. Most mortgage lenders require liability coverage, which the FAIR Plan does not include. Buyers typically pair FAIR Plan with a wrap policy to satisfy lender requirements. Jumbo lenders may have additional requirements beyond this combination.
How much does FAIR Plan insurance cost in California in 2026?
FAIR Plan premiums vary widely by location and property. Combined FAIR Plan + wrap coverage typically runs $3,200–$5,500/year for moderate fire zone properties, $5,700–$10,500 for high fire zone properties, and $11,000–$22,000+ for severe fire zone or high-value properties.
Related Resources: California Fire Zone Mortgage & Insurance Hub | Complete 2026 Insurance Crisis Guide | Wrap Policies: Filling the FAIR Plan Gap | What Lenders Require in Fire Zones
Talk to Michael Directly
DiVita Home Finance | Tiburon, CA | In lending since 2000, founded DiVita Home Finance in 2007. Michael DiVita DRE #01372066 | NMLS #241655. Company DRE #01818285 | NMLS #323700.
💬 Text: (310) 849-9124
