The California FAIR Plan on July 25, 2025, started offering a new “high-value” commercial property coverage option for larger housing developments, farms and businesses with multiple buildings at one location.
The new limits are up to $20 million per building, with a total maximum of $100 million per location — up from the previous limit of $20 million per location. These coverage limits are available to all eligible applicants for both new and renewal policies.
The FAIR Plan covers the following commercial structures:
- Habitational buildings — Buildings with five or more habitational units, such as apartment buildings, hotels or motels.
- Retail establishments — Shops such as boutiques, salons, bakeries and convenience stores.
- Manufacturing — Companies that manufacture most types of products.
- Office buildings — Offices for professionals such as design firms, doctors, lawyers, architects, consultants or other office-based functions.
- Buildings under construction — Residential and commercial buildings under construction from the ground up.
- Farms and wineries — Basic property insurance for commercial farms, wineries and ranches, not including coverage for crops and livestock.
Why the increase
The decision comes as commercial property rates continue rising due to inflationary pressures, particularly for companies in areas considered urban-wildland interfaces.
Rebuilding costs have also risen substantially over the past five years, making the old FAIR Plan limits inadequate.
FAIR Plan limitations
The FAIR Plan is taking on more policyholders as more insurers pull back from the California market. Under state law, if a business can’t find an insurer that is licensed in California, the first option is to go to the “non-admitted” market, which consists of insurers not licensed in the state but often backed by established insurers like Lloyd’s of London.
If there are no takers in this market, the last resort is the FAIR Plan. However, costly FAIR Plan policies are not a complete replacement for a commercial property insurance policy. Policies only provide coverage for damage caused by the specific causes of loss listed in the policy:
- Fire
- Lightning
- Internal explosion
Optional coverages are available at an additional cost, such as for vandalism and malicious mischief.
If you have to go to the FAIR Plan, we can arrange for a “differences in conditions” policy that will cover the areas where the plan is deficient compared to a commercial property policy.
