Homeowners in brush areas must purchase their primary fire insurance from the California Fair Plan Assn., but that policy is very limited in its coverage--only a few specifically named perils are covered.
Most policies offered by regular insurance companies are all-risk--all perils are covered, except a few that are excluded.
The three most important and necessary coverages the Fair Plan policy does not cover are replacement cost, theft and liability.
The Fair Plan pays claims on a depreciated basis, not on a replacement cost basis. A depreciated settlement can result in the policyholder getting such a small percentage of the replacement cost of the house that it would be financially impossible to rebuild--yet payments must still be made for the home loan.
There is no coverage for burglary or any other type of theft.
The worst exclusion is liability coverage because there is no limit to the liability a homeowner can be exposed to if sued. This is the type of exposure that can force the loss of a house, savings and even future earnings.
Fortunately, a few major insurance companies offer wraparound policies that fill the gaps in the Fair Plan policy. They offer replacement cost on the dwelling, theft and liability coverage, and work with the Fair Plan to provide the equivalent of a regular homeowner's policy.
If you are insured by the California Fair Plan, call your insurance agent and ask if he can sell you a wraparound policy. It could save your house and your financial future.