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I am in porcess to buy a home in San Diego. As it has been covered relentlessly in the news lately, it is not a secret that Southern California is very prone to fires. Now, I am shopping around for Home insurance policies and sounds like major insurance providers like AAA, Liberty Mutual and Costco(Ameriprise) denied coverage to my house. However, each of them pointed me to a insurance company which they say is "underwritten by them" will insure my house. Which to me is very weird.

  1. What does a policy underwritten by another company even mean?
  2. Why are these big companies ready to underwrite the policies but not cover directly?
  3. What does it mean for me? Would I get a service which is lo quality because its directly not from a big insurance provider?

Should I be worried about any potential claims?

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  1. The company that's doing the work of selling you the policy isn't the one that's actually taking the financial risk. this is quite common in the insurance industry.

  2. The company you will deal with is likely more experienced in assessing the risks involved. The underwriters only want to deal with simple policies directly themselves.

  3. Maybe. But probably not. All your dealings would be through the company you paid, not the underwriter.

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Most (Many?) states have a so called Policy of last resort to insure High risk properties. These policies are called Fair Access to Insurance Requirements (FAIR) Plans. It is a joint program between the state and the insurance companies.

According to the California department of insurance (a state agency):

What If I Can't Find Insurance?

If after shopping the market you are still having difficulty obtaining residential insurance, you may want to contact the California FAIR Plan to explore your coverage options. As the insurer of last resort, the California FAIR Plan should only be considered after a diligent search for coverage in the traditional insurance market. If you are turned down or non-renewed by your current insurance company, or are otherwise in need of coverage, you may apply for coverage under the FAIR Plan through an agent or broker licensed to sell property insurance, or you may contact the FAIR Plan directly at 800-339-4099.

Please note that the FAIR Plan only provides coverage for the losses caused by Fire or Lightning, Internal Explosion, and Smoke. For an additional premium, Extended Coverage (windstorm, hail, explosion, riot or civil commotion, aircraft, vehicles, and volcanic eruption) and Vandalism or Malicious Mischief may be added to the policy. Since the FAIR Plan policy does not cover all the perils insured under a traditional homeowners' insurance policy such as theft or liability, you may want to consider purchasing a separate Differences in Conditions (DIC) policy in addition to the FAIR Plan policy. DIC insurance is designed to fill in gaps in insurance coverage. It provides expanded coverage for some perils that are not covered by the FAIR plan policy. Above is a list of carriers currently offering DIC policies. You may also wish to contact an agent or broker to help you shop around for this type of coverage.

they also include a link to the California FAIR plan Association. where they explain in detail what is and is not covered.

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