Rising HOA Insurance Costs in California and the FAIR Plan

California HOA master policy premiums have climbed, and many associations have received nonrenewal notices, mainly because insurers have pulled back from wildfire-exposed areas and from older multi-unit buildings. When no standard carrier will write the property coverage, the California FAIR Plan is the backstop, usually paired with a second policy that fills its gaps. This article is about California, and it explains why this is happening, what the FAIR Plan does and does not cover, and the steps a board can take.

Why premiums rose and carriers nonrenewed

No single cause explains every renewal, and the numbers differ widely from one community to the next, so be wary of anyone quoting a “typical” increase. The common drivers boards hear from brokers are:

• Wildfire exposure. Carriers reassessed how much property they were willing to insure in and near high fire hazard areas after several years of large wildfire losses. Communities that never had a claim can still be nonrenewed because of where they sit on a risk map.
• Reinsurance and rebuilding costs. Insurers buy their own insurance (reinsurance), and construction costs set the price of every claim. When both rise, premiums follow.
• Building age and condition. Older roofs, original plumbing, aluminum wiring, deferred maintenance and a history of water claims all make underwriters less willing to quote.
• Concentration of value. A condominium association may insure tens of millions of dollars of buildings at one address, which is a large single bet for a carrier.

Admitted and surplus lines carriers

It helps to know which market your policy comes from. An admitted carrier is licensed by the state, files its rates and forms with the California Department of Insurance, and is backed by the state guarantee association if the company fails. A surplus lines (non-admitted) carrier is not subject to the same rate filing rules and is not covered by the guarantee association, but it can take on risks the admitted market declines. Many associations that lost an admitted carrier now buy coverage from surplus lines insurers, often in layers from several companies. That is legal and common. It usually costs more, and terms such as deductibles and exclusions deserve a close read. For a refresher on the policies involved, see the five core HOA insurance policies.

What the California FAIR Plan is

The California FAIR Plan is an insurance pool created by state statute in 1968 (Insurance Code section 10090 and following). It is made up of the property and casualty insurers licensed in California, which share its profits and losses. It is not a state agency and it is not funded by taxpayers. The Plan describes itself as an insurer of last resort that provides basic property insurance when coverage is not reasonably available elsewhere. You apply through a licensed broker registered with the Plan.

What a FAIR Plan commercial policy covers

Condominium and other association buildings are generally written on the FAIR Plan’s commercial program. According to the FAIR Plan’s commercial policy page, it is a named-peril policy, meaning it pays only for the causes of loss it lists: fire, lightning and internal explosion. Optional coverages such as vandalism and malicious mischief cost extra.

That list is short. A FAIR Plan property policy is not a package policy. Water damage from a burst pipe and theft are not among the named perils, and the property policy does not replace the association’s general liability, directors and officers, or fidelity coverage.

Current coverage limits for associations

Limits have changed several times, so confirm the current figures with your broker:

• 2023. The commercial limit was raised to $20 million per location.
• 2025. On March 28, 2025, the Insurance Commissioner approved a “high-value” commercial option of up to $20 million per building with a maximum of $100 million per location. The Department of Insurance named homeowners associations among the groups it was meant to help.
• 2026. The FAIR Plan’s plan of operation approved by the Commissioner in 2026 keeps those limits and treats all units on one recorded map or condominium plan as a single location. It also describes the high-value program as temporary, with a scheduled end date in July 2028 unless that changes. Ask your broker how that affects a multi-year plan.

For a large community, even $100 million per location may be less than full replacement cost, which is one reason boards end up with layered coverage.

Difference-in-conditions policies

A difference-in-conditions (DIC) policy, sometimes called a wrap policy, is sold by a private insurer to sit alongside a FAIR Plan policy. It is designed to add back the perils the FAIR Plan leaves out, such as water damage and theft, and it may be packaged with liability coverage. Together the two policies are meant to approximate a standard master policy.

Points to check with your broker:

• Gaps between the two policies. Compare the perils, limits and deductibles side by side.
• Two renewals. Each policy has its own carrier, term and nonrenewal risk.
• Excess limits. If the buildings are worth more than the FAIR Plan limit, you may need excess property coverage on top.

What this means for owners’ mortgages

Lenders care about the master policy because it protects their collateral. Fannie Mae, Freddie Mac and FHA each publish insurance requirements for condominium projects, and a project that falls short can become hard to finance or refinance.

The requirements change, so rely on a lender’s current reading. As one example, Fannie Mae’s Lender Letter LL-2026-03 (March 18, 2026) states that master property coverage must equal at least 100 percent of the estimated replacement cost of the project improvements, allows roofs to be insured on a basis other than replacement cost, and sets a maximum per-unit deductible of $50,000 for required perils on loans with application dates on or after July 1, 2026. Freddie Mac issued its own update at the same time, and FHA has separate rules.

In practice, boards should expect lender questionnaires asking for limits, deductibles and carrier details, and should answer them accurately. If your association is on the FAIR Plan with a DIC policy, ask your broker for a one-page summary that lenders and escrow officers can use. Our article on what lenders look at in an HOA covers the wider review.

What boards can do

None of these steps guarantees a lower premium. They improve your odds and your record of acting carefully.

1. Start early. Begin the renewal at least four to six months out. Ask your current carrier’s intentions in writing.
2. Have the broker market the account widely. Ask which carriers were approached, admitted and surplus lines, and which declined. If your broker has limited access to markets, a second opinion is reasonable.
3. Present the property well. Underwriters respond to documentation: roof age and condition, plumbing and electrical updates, a current reserve study, loss history and a recent insurance appraisal.
4. Invest in mitigation. The Department of Insurance’s Safer from Wildfires framework lists the measures insurers look for, such as Class A roofs, ember-resistant vents and a five-foot ember-resistant zone. The FAIR Plan also advertises discounts for wildfire hardening.
5. Weigh deductibles carefully. A higher deductible lowers premium but shifts cost to the association and possibly to owners. Check your CC&Rs (covenants, conditions and restrictions) for who pays, and check lender limits.
6. Budget for it. Build a realistic insurance line into the budget rather than hoping for a soft market.

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In California: assessments and disclosure

Paying for a premium spike

A large mid-year premium can collide with the statutory limits on assessments. Under Civil Code section 5605, a board may not raise regular assessments more than 20 percent over the prior fiscal year, or levy special assessments totaling more than 5 percent of budgeted gross expenses, without approval of a majority of a quorum of members. Civil Code section 5610 lifts those limits for defined emergencies. Whether an insurance increase fits one of those emergency categories is a legal question for the association’s attorney. See how much an HOA can raise dues in California.

What the law requires you to tell owners

• Annual insurance summary. Civil Code section 5300(b)(9) requires the annual budget report, distributed 30 to 90 days before the fiscal year ends, to summarize the association’s property, general liability, earthquake, flood and fidelity policies. For each one it must state the insurer’s name, the type of insurance, the policy limit and any deductible, along with a required statement advising owners to review their own coverage.
• Notice when coverage changes. Civil Code section 5810 requires individual notice to all members as soon as reasonably practicable if one of those policies lapses or is canceled and is not immediately replaced, or if there is a significant change such as a reduction in coverage or limits or an increase in the deductible. If the association receives a nonrenewal notice and replacement coverage will not be in place when the policy ends, it must notify members immediately.

A move from a standard master policy to the FAIR Plan plus a DIC policy, or a sharply higher deductible, is the kind of change owners need to hear about. Beyond the legal minimum, it is good practice to explain what changed in plain terms, because owners may need to adjust their own unit policies. Our article on homeowners insurance in an HOA explains what individual policies cover.

Frequently asked questions

Can an HOA or condo association buy a FAIR Plan policy?

Yes. Associations can apply for commercial property coverage through a broker registered with the FAIR Plan. It is meant for properties that cannot find coverage in the regular market.

Does the FAIR Plan cover everything our old master policy did?

No. The basic commercial policy covers fire, lightning and internal explosion. Most associations pair it with a difference-in-conditions policy and keep separate liability, directors and officers, and fidelity coverage.

Do we have to tell owners if our insurance is nonrenewed?

If replacement coverage will not be in effect when the old policy ends, Civil Code section 5810 requires immediate notice. A significant change in coverage, limits or deductible also triggers notice.

Insurance renewals now take more board time than they used to. If your board is stretched, our HOA management section explains what professional support can take on, and the insurance hub has more on each type of policy.

The Law Behind This Article

Every legal point in this article comes from the official text. Each link below opens it in a new tab.

Civil Code sections: 5300 · 5605 · 5610 · 5810

Other sources: California FAIR Plan: About the FAIR Plan · California FAIR Plan: Commercial Policy · California Department of Insurance: High-Value FAIR Plan Commercial Option (March 2025) · California Department of Insurance: Safer from Wildfires

This article is general educational information, not legal or financial advice. Laws vary by state and your association’s governing documents control many of these questions, so check with your association’s attorney or another qualified professional about your situation.