The Drying Disaster‐Relief Insurance Pools
By Rick Tobin
Homeowners and landlord insurance policies are akin to your“ safety net” that protects your investment from numerous types of disaster, crime, or“ bad luck” situations like a faulty electrical outlet that explodes after too many electronics were plugged into it.
Directly or indirectly, your insurance payouts may be coming from pooled insurance company funds with or without governmentbacking whether you’ re aware of it or not.
Because most American homeowners have the bulk of their net worth tied up in their primary home where they reside, it’ s quite important to make sure that you have sufficient amounts of insurance protection in place for any sort of negative situation that could damage your property.
Mortgage companies require that property owners maintain insurance policies on the subject property that protects both the owners and lenders. Any loss of sufficient amounts of insurance coverage protection can be akin to a mortgage default that triggers future foreclosure actions.
The Pooled California FAIR Plan
To simplify, an insurance“ pool” shares or spreads out the risk amongst numerous insurance companies. This way in theory at least, one major catastrophe like a firestorm, hurricane, or massive flooding situation doesn’ t financially wipe out one insurance company that took on the bulk of the financial risk for a specific region.
Here in California, the FAIR( Fair Access to Insurance Requirements) Plan is considered to be the“ insurer of last resort” for property owners who cannot find other forms of insurance.
The FAIR Plan is an insurance pool, which originates from numerous Californialicensed insurance companies, that allows highrisk homeowners or investors to gain access to basic fire insurance protection options while limiting any one insurer from having too much liability. Here in 2025, a high percentage of the state of California is now considered“ highrisk” as more people are forced to only choose from the much more expensive FAIR Plan.
The FAIR Plan was first created back in 1968 by the California Department of Insurance( CDI). While the FAIR Plan
Because most American homeowners have the bulk of their net worth tied up in their primary home where they reside, it’ s quite important to make sure that you have sufficient amounts of insurance protection in place for any sort of negative situation that could damage your property. was originally created by the CDI agency and is often described as“ statemandated” property insurance, it’ s actually owned and managed by many of the same private insurers who already turned down the property owners before in a much larger giant“ pool” of insurance funds.
Insurance Payout Limits
The FAIR Plan caps, or has an upper ceiling limit for claims, for insurance payouts for natural disasters at $ 3 million for policyholders, according to ABC News. Average home listing prices in Pacific Palisades were closer to $ 4 million dollars back in December 2024 before the massive firestorm hit.
The averagesized home in Pacific Palisades was near 3,000 square feet, according to ATTOM that I shared in my previous article entitled Steps to Recover from the Pacific Palisades Firestorm.
The rebuilding process, which includes numerous permit fees, could reach as high as $ 800 to $ 1,000 per square foot to rebuild according to some estimates. If so, a 3,000 square foot home to rebuild may cost as much as $ 3 million dollars($ 3,000 sq. ft. x $ 1,000 / sq. ft.).
There are several properties located in the Palisades that are valued at tens of millions. How will these FAIR Plan insurance payout caps impact the rebuilding process if the cost far exceeds the $ 3 million dollar limit?
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