Homeowners without insurance can lose everything if their home becomes damaged or destroyed due to vandalism or weather. Homeowners sometimes live in an area that presents too much of a risk for an insurer to cover so they cannot obtain a policy regardless of the price. The U.S. government developed Fair Access to Insurance Requirements (FAIR) plans in the 1960s to provide insurance to homeowners who cannot obtain insurance, and some states offer special insurance pools to cover damage from storms.
Homeowners cannot always qualify for insurance due to bad credit, location or home condition. According to the Texas FAIR Plan Association, FAIR plans are considered a last resort for homeowners insurance and cost more than traditional policies. Individual states manage these insurance pools, and homeowners purchase the plan through an approved private insurance agency. According to the Insurance Information Institute, 32 states currently offer FAIR plans as of March 2011.
In order to qualify for a FAIR plan, residents need to apply to a variable number of insurance companies and receive a rejection notice, depending upon the state. The Texas FAIR plan requires homeowners to have at least two insurance companies turn them down before they can apply for coverage. FAIR plans only apply to owner-occupied properties, so second homes and investment properties do not qualify.
As of March 2011, homeowners can receive coverage up to $1 million in home value and liability insurance up to $300,000 through a FAIR plan. This coverage provides protection against fire, lightning, windstorm, explosion, aircraft, vandalism, hurricane and riot damage, according to the Texas FAIR Plan Association.
State FAIR plans will not insure condemned properties or property with significant damage. Persons who have a conviction for insurance fraud or arson cannot qualify. Business properties do not qualify for state homeowners insurance. An insurer can deny coverage through a state FAIR plan if the individual has excessive paid claims in a short time frame or has liability risks on the property such as dangerous animals, a swimming pool or an exposed trampoline.
Residents living in coastal areas may have homeowners insurance policies that cover theft, vandalism and fire damage, but they cannot obtain insurance against hurricanes and windstorms. As of March 2011, Beach and Windstorm Plans in Alabama, Florida, Mississippi, North Carolina, New York, South Carolina and Texas offer coverage against wind and hail damage when homeowners cannot obtain such insurance on their own. To qualify under the New York Coastal Market Assistance Program, homeowners need to have been rejected from at least three private insurers before applying for coverage.