(Part 2 of 6) Mastering California Insurance: Insights, Tips & Listener Q&A
Published Date: 07/02/2024
Understanding FAIR Plan Discounts and Home Hardening Rules: What Every California Homeowner Should Know
As California’s wildfire crisis intensifies, homeowners across the state are turning to the California FAIR Plan — the state’s insurer of last resort — for coverage that many traditional insurers no longer offer.
But even as more people join the FAIR Plan, confusion remains about how its discount system works, especially when it comes to home hardening and defensible space.
In a recent episode of Insurance Hour, insurance expert Karl Susman addressed a wave of listener questions about these topics — clearing up what qualifies for discounts, what certifications are needed, and why doing “half the list” won’t earn partial savings.
If you’ve ever wondered how to qualify for FAIR Plan discounts or why your premium hasn’t gone down despite major fire safety upgrades, this is for you.
What Is the FAIR Plan, and Why It Matters
The California FAIR Plan Association was created in 1968 to ensure that every homeowner could obtain basic fire coverage, even in high-risk areas.
It’s not a state agency — it’s a pool of private insurance companies collectively funding coverage for those who can’t find policies elsewhere.
In recent years, however, the FAIR Plan has become more than just a “last resort.” As wildfires, reinsurance costs, and regulatory delays have driven private insurers out of the market, the FAIR Plan now insures hundreds of thousands of homes once covered by standard carriers.
“The FAIR Plan exists to give people coverage when the admitted market won’t,” Susman explained. “But because it’s heavily regulated, it doesn’t have the flexibility private carriers do.”
That regulation extends to its discount structure, which is governed by state rules — not just the FAIR Plan’s discretion.
What Is “Home Hardening”?
Home hardening refers to construction and maintenance practices designed to make a structure more resistant to fire.
The FAIR Plan offers two main categories of discounts:
- Home Hardening (to the structure itself)
- Defensible Space (around the property)
Each requires homeowners to meet specific, verifiable criteria outlined by the FAIR Plan — and only those who complete all requirements for each category qualify for a discount.
“There are two groups of things you can do,” Susman explained. “One group applies to your home, and another to the area around your home. You have to do all of the things in one category to get that discount. You can’t do half of each and expect a price break.”
The FAIR Plan Discount Form: Your Roadmap
Many homeowners aren’t aware that the FAIR Plan publishes a simple one-page PDF form listing all the requirements for both types of discounts.
This form — officially called the “Mitigation Discounts Form” — is available on the FAIR Plan’s website. It specifies:
- Exactly what qualifies as a “hardened home.”
- What vegetation and clearance requirements must be met.
- What documentation or certifications may be required.
“If you can’t find the form online, email me,” Susman said. “I’ll send you a copy. It literally lists everything you need to do, step by step.”
The Two Discount Categories Explained
1. Home Hardening (Improvements to the House Itself)
This discount applies to features that make your structure more fire-resistant, such as:
- Class A fire-rated roofing (metal, tile, or composition shingles).
- Ember-resistant attic or soffit vents.
- Noncombustible siding and decking materials.
- Tempered glass windows.
- Enclosed eaves and decks.
To qualify, you must complete all required upgrades listed under this section.
“If you do everything required for the home itself, you’ll get one discount,” Susman clarified. “But you must do every item. You can’t pick and choose.”
2. Defensible Space (Mitigation Around the Property)
This discount applies to work done around the home, such as:
- Clearing vegetation and debris within 100 feet of the structure.
- Trimming tree branches at least 10 feet away from the roof.
- Removing dead plants, leaves, and pine needles.
- Maintaining fuel breaks and safe zones.
Again, you must complete all listed items in this category to receive the discount. Partial compliance does not qualify.
“You could do everything around the house and nothing to the house itself — that’s fine,” Susman said. “But you only get the discount for that portion. The same goes for the house.”
No Partial Credit
One of the biggest misconceptions about FAIR Plan discounts is the idea that partial compliance — say, replacing a roof but not vents — should result in partial savings.
Unfortunately, that’s not how the program works.
“You can’t do half of each category and expect a discount,” Susman said. “You either complete all the steps for home hardening, all the steps for defensible space, or both. That’s how the discounts are structured.”
This all-or-nothing approach has frustrated many homeowners, especially those who have made major investments but still fall short of full compliance due to cost or technical limitations.
Still, Susman reminded listeners that even without an immediate premium reduction, those improvements significantly reduce the likelihood of total loss.
“Keep in mind,” he said, “the goal isn’t just to save money — it’s to keep your home from burning down.”
Why the FAIR Plan Is So Rigid
Unlike private carriers, the FAIR Plan operates under strict rules approved by the California Department of Insurance (CDI).
That means:
- Discount programs must be filed and approved by regulators.
- Qualifications and documentation must be consistent statewide.
- FAIR Plan representatives can’t negotiate or make exceptions.
This rigidity ensures fairness and accountability, but it also limits flexibility.
“They can’t just add new discounts on the fly,” Susman explained. “They’re literally following what’s written into regulation.”
Certification and Verification
Listeners also asked what kind of certifications are required to claim these discounts — and whether a property must be 100% compliant to qualify.
The answer depends on which discount you’re applying for.
For Defensible Space, many counties and local fire departments already issue compliance certificates under Public Resources Code Section 4291, which requires vegetation clearance around homes in fire-prone areas.
For Home Hardening, the FAIR Plan may require proof through inspection reports, photographs, or contractor documentation.
“The form will tell you exactly what’s needed,” Susman said. “But yes, you have to be fully compliant for each section. There’s no halfway.”
Why Your Premium Might Not Go Down — Yet
Even after completing all mitigation requirements, some homeowners notice that their FAIR Plan premium barely changes.
This happens because the discount percentages are modest, often in the single digits.
In addition, the FAIR Plan’s base rates continue to rise due to record wildfire losses, inflation, and reinsurance costs — factors far beyond individual control.
“Even if you do everything right,” Susman acknowledged, “you’re still in a system that’s struggling. These improvements will help over time, especially once private carriers start recognizing them again.”
Bigger Picture: Why Doing It Still Matters
While the financial reward may be small now, the practical reward is enormous.
Home hardening dramatically improves survival odds during wildfire events. In recent fires, hardened homes were shown to be up to 40% more likely to survive than non-hardened homes, even in identical neighborhoods.
Moreover, the Sustainable Insurance Strategy, launched by Commissioner Ricardo Lara, aims to make mitigation count more significantly in future rate filings — both for FAIR Plan and private insurers.
That means the work homeowners are doing today could lead to larger discounts and better coverage options in the next few years.
“You’re not just protecting your property,” Susman said. “You’re investing in a system that’s changing.”
The 3-Million-Dollar Question
Another listener asked:
“Are there any companies still insuring homes worth over $3 million? It would be helpful to avoid calling those that aren’t.”
Susman noted that many carriers still write high-value homes — but mostly through specialty or surplus lines markets, not the traditional admitted carriers.
“We have to define what you mean by a three-million-dollar home,” he explained. “Are you talking about market value or replacement cost? Because that makes a huge difference.”
Homes valued at $3 million for market price might only have $1.5 million in reconstruction cost, which affects which insurers will consider coverage.
For ultra-high-value homes, specialty markets like Chubb, PURE, or AIG Private Client Group may still offer options — but availability depends heavily on location and claims history.
Key Takeaways for Homeowners
- Get the FAIR Plan discount form. It’s your official checklist for home hardening and defensible space.
- You must complete all steps per category. No partial credit — it’s all or nothing for each discount.
- Certifications matter. Verify defensible space through your local fire authority and keep all receipts and photos.
- Don’t rely on discounts alone. The goal is protection, not just savings.
- Expect more meaningful rewards soon. New regulations under the Sustainable Insurance Strategy will eventually make mitigation pay off more.
Final Thoughts: Building a Smarter System
California’s wildfire risk isn’t going away — but the way we insure against it is evolving.
The FAIR Plan’s discount program may feel rigid, but it’s an important foundation for future change. As regulatory reform takes hold, mitigation will become not just a moral duty but an economic advantage.
For now, homeowners should think beyond immediate premiums and focus on resilience.
“At the end of the day,” Susman said, “the goal isn’t to save fifty bucks a year. The goal is to save your house.”
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