Home Insurance Articles
The Fair Program And Its Effect On The Housing Insurance Industry
2010-05-06
Homeowners that have property located in high-risk areas have benefits under the FAIR Program. The impact of the FAIR program on the housing insurance industry has been has been felt since the 1960s.
A homeowner that has purchased a home in an area prone to risks like crime or severe weather would have found it difficult to secure a home insurance policy. Insurance companies were reluctant to provide home insurance for certain properties. Homeowners that are denied coverage under traditional plans are provided with alternative coverage. When a homeowner is denied coverage under traditional plans, a person can get a home insurance policy under the FAIR (Fair Access to Insurance Requirements) program. Currently there are 28 states that offer FAIR plans.
The FAIR Program typically offers less coverage than a typical home insurance policy. The FAIR Program requires that any plans offering this type of insurance cover losses due to fire, riot, windstorms, and vandalism. The additional rules involving the level of coverage offered through the plans are determined by the state.
A state's Insurance Commissioner is responsible for oversight of the FAIR insurance programs offered. Often the plans are subsidized by other larger carriers operating within a state. In addition to oversight, the Insurance Commissioner is responsible for verifying that the property isn't eligible for the voluntary market. If the designated property is unable to be insured with a certain percentage of carriers in the voluntary market, the home is classified as a property eligible for the program.
The costs for FAIR policies are often higher than similar policies covering properties in less riskier locations. The insurance companies are required to cover costs associated with the FAIR plan through mandated subsidies. Homeowners may be able to benefit from government subsidies. There are various programs in place designed to offset the costs of the expensive coverage for homeowners in need of the assistance.
This type of insurance also provides coverage to business owners. Business owners who are having difficulty getting property insurance may also be eligible for this program. The business owners are subject to meeting the same provisional requirements set forth by the state in which they conduct business.
FAIR insurance plans were designed to increase access to home insurance policies for those in need. The FAIR program is subsidized by insurance companies, so insurance companies are required to cover some of the costs for insuring properties in high-risk areas. Where insurance companies could create expensive policies without covering certain incidents of crime and natural disaster, insurance companies are now required to provide a minimum level of coverage. The homeowner is guaranteed coverage for property damage where certain natural disasters, riots, and crime under a FAIR plan.