Is It Bad to Use Your State’s Insurer of Last Resort? Pros & Cons of FAIR Plans

Generally, FAIR Plans provide higher-cost, basic insurance coverage to homeowners and business owners with no other option.

If you’ve been denied by multiple private carriers, for example, then you might use your state’s FAIR Plan to get coverage.

As insurers adjust to rising risk nationwide, FAIR Plans are becoming more important. California’s FAIR Plan recently doubled in size, for example, after private insurers cancelled policies statewide. In April 2025, Colorado launched the first FAIR Plan in the United States since Hawaii in 1991, becoming one of 33 states with official insurers of last resort.

Should you use your state’s insurer of last resort? What are the pros and cons of a FAIR Plan? Let’s find out.

FAIR Plans Are Built for a Small Percentage (~1%) of Homeowners & Business Owners

FAIR Plans are insurers of last resort for a reason; they’re the insurer you should turn to only when ordinary options – like the private market – haven’t worked.

Only a small percentage – say, around 1% – of each state’s residents are expected to join the state’s FAIR Plan.

California has a population of around 40 million, for example, and around 450,000 Californians are members of the state’s FAIR Plan (1.1% of the population). Colorado recently launched its FAIR Plan with the goal of covering around 1% of homeowners and business owners statewide.

Many states also actively seek to depopulate their FAIR Plans. Louisiana and Florida, for example, have actively depopulated their FAIR Plans throughout 2025, pushing as many policyholders as possible to the private market.

In other words, FAIR Plans aren’t just another insurance option on the market; in most states, they’re designed to be your only option.

FAIR Plans Are Generally Your Only Option

In most states, FAIR Plans are genuinely the insurer of last resort.

Colorado’s FAIR Plan, for example, requires you to be denied coverage by at least three admitted insurers before you can apply.

If you already have insurance through a private carrier, then the FAIR Plan isn’t for you. It’s for homes and businesses in high-risk areas with no other place to turn; the FAIR Plan is their last resort.

Most States Have FAIR Plans

In 2025, Colorado became the first state since Hawaii in 1991 to launch a FAIR Plan.

To date, 33 states plus Washington, DC have a FAIR Plan.

In some states – like states with severe weather and a difficult insurance climate – the FAIR Plan plays a crucial role in the insurance industry, covering hundreds of thousands of homeowners statewide. In others, the FAIR Plan covers a limited number of people in select areas.

Notable state-by-state examples of FAIR Plans include:

• California’s FAIR Plan, which covers 450,000 homes across the state while protecting more property (by value) than all other states but Florida.
• Florida’s Citizens Property Insurance Corporation, which is a combination of the state’s old FAIR Plan and Beach Plan systems and covers 1.5 million homes and businesses statewide.
• The Texas FAIR Plan Association (TFPA), which is specifically designed for homeowners and not businesses, covering around 79,400 people (and 0 businesses) statewide.
• The North Carolina FAIR Plan system, which includes the NCJUA (for standard property coverage) and the NCIUA (for coastal property coverage) – similar to Florida’s old combination of the FAIR Plan and Beach plan system.
• The Louisiana Citizens Property Insurance Corporation, which protects around 200,000 Louisiana homes and businesses.

Pros & Cons of FAIR Plans

A FAIR Plan may be your only insurance option. Like any insurance plan, however, a FAIR Plan comes with pros and cons.

Pros

Advantages of a FAIR Plan include:

1. Basic coverage
2. It’s your only insurance option

Basic coverage. FAIR Plan policies are designed to provide basic coverage – say, to meet mortgage requirements. They’re not “bells and whistles” policies for maximum protection against all losses. Colorado’s new FAIR Plan, for example, only protects against lightning and fire losses (although wind and hail coverage is available at an extra cost).

It’s your only insurance option. The biggest advantage of a FAIR Plan is that it’s your only insurance option. You have nowhere else to buy insurance. It’s both the best and worst insurance you can buy. FAIR Plans are designed to cover high-risk homeowners who are unable to buy insurance from private carriers.

Cons

1. Higher costs
2. Actual cash value coverage
3. More exclusions
4. Limited coverage overall
5. No shopping around

Higher costs. FAIR Plans aren’t always subsidized by the government, and they’re not a charity. Instead, they’re typically funded by a pool of private insurers who collectively cover the state’s highest-risk homes and businesses. Although the FAIR Plan provides coverage when the market does not, they don’t cover risk for free. Expect to pay higher costs with FAIR Plans that reflect the higher risk of the covered property.

Actual cash value coverage. Most FAIR Plans only offer actual cash value coverage instead of replacement value coverage. That means insurers only compensate you based on the value of your property minus depreciation, not the cost of actually replacing your property after a loss. You may have paid $20,000 for a new roof ten years ago, and it may cost $25,000 to install a new roof today. However, your insurer might only pay $2,500 in compensation because of depreciation.

More exclusions. FAIR Plans tend to offer basic coverage with more exclusions. They might exclude personal property coverage, for example, or water damage.

Limited coverage overall. FAIR Plans may have certain limits on the amount of property you can insure. Colorado’s FAIR Plan, for example, covers a maximum of $750,000 for residential properties. If your home is worth more than that amount, then only the first $750,000 of damage is covered.

No shopping around. The FAIR Plan is your only option for insurance. It’s not available to people who have multiple insurance options. If you don’t like your experience with the FAIR Plan, then tough luck; it’s your only insurance option (unless a private carrier re-launches coverage in your area).

Final Word: FAIR Plans Play an Important Role in the Insurance Industry

Ultimately, FAIR Plans aren’t good or bad. They’re a necessary part of the insurance landscape.

They’re insurers of last resort built to cover around 1% of homeowners and business owners in a given state – including those living in high-risk areas with no other options.

Stephanie Corona

Stephanie is a property insurance claim expert with over 20 years of experience working as an insurance adjuster, expert witness, appraiser and umpire. She is passionate about sharing her expertise, knowledge, tips and training to help both property owners and Public Adjusters in their pursuit of effectively managing claims and recovering the claim settlement they deserve after a loss.