One of the most common questions homeowners ask after receiving a non-renewal notice is:
“Will my mortgage company accept a California FAIR Plan policy?”
The short answer is:
In most cases, yes—but there are important details you need to understand.
If your lender requires homeowners insurance and you’re considering the California FAIR Plan, here’s what you need to know before your current policy expires.
Why Do Mortgage Companies Require Home Insurance?
When you have a mortgage, the lender has a financial interest in your property.
The home serves as collateral for the loan, so the lender wants to ensure that if the property is damaged by fire or another covered loss, insurance funds are available to repair or rebuild the home.
That’s why lenders require:
- Property insurance
- Adequate dwelling coverage
- Mortgagee clause listing the lender
- Continuous insurance coverage
Failing to maintain coverage can result in force-placed insurance by the lender, which is often significantly more expensive and provides limited protection.
What Is the California FAIR Plan?
The California FAIR Plan is a state-mandated insurance association created to provide basic property insurance to homeowners who cannot obtain coverage through the standard insurance market.
Many homeowners turn to the FAIR Plan after:
- A homeowners insurance non-renewal
- Living in a wildfire-prone area
- Multiple insurance company declinations
- Difficulty obtaining traditional coverage
The FAIR Plan primarily provides coverage for:
- Fire
- Smoke
- Lightning
- Internal explosion
It is often paired with a companion Difference in Conditions (DIC) policy to provide broader protection.
Do Most Mortgage Companies Accept FAIR Plan Coverage?
Yes—Generally They Do
Most banks, mortgage lenders, and loan servicers will accept California FAIR Plan coverage as long as:
✅ The policy provides sufficient dwelling coverage
✅ The lender is listed as the mortgagee
✅ Coverage remains active without lapse
✅ Any required companion policy is in place
Since the FAIR Plan is often the only available option for homeowners in high-risk areas, lenders are very familiar with it.
In many wildfire-prone regions of California, FAIR Plan policies have become increasingly common.
[IMAGE PLACEHOLDER 1]
Alt Text: Homeowner confirming insurance requirements with mortgage lender.
Why Some Lenders May Request Additional Coverage
While lenders generally accept FAIR Plan policies, some lenders want more protection than the FAIR Plan provides by itself.
The FAIR Plan is not a full homeowners policy.
A standard FAIR Plan policy does not include:
❌ Personal Liability
❌ Theft Coverage
❌ Most Water Damage
❌ Personal Injury Coverage
❌ Broad Homeowners Protection
Because of these limitations, many lenders prefer that homeowners also maintain a companion policy.
What Is a Companion (DIC) Policy?
A Difference in Conditions (DIC) policy is commonly paired with the California FAIR Plan.
Together, the FAIR Plan and companion policy create protection that more closely resembles a traditional homeowners insurance policy.
A companion policy may include:
✔ Liability Coverage
✔ Water Damage Coverage
✔ Theft Coverage
✔ Additional Living Expense Coverage
✔ Medical Payments Coverage
✔ Broader Property Protection
Many mortgage companies are more comfortable when both policies are in force.
[IMAGE PLACEHOLDER 2]
Alt Text: Homeowner reviewing FAIR Plan and companion policy coverage.
Will My Mortgage Company Require Replacement Cost Coverage?
In many cases, yes.
Most lenders want coverage based on the home’s replacement cost rather than market value.
The required dwelling limit depends on:
- Home size
- Construction type
- Rebuilding costs
- Lender requirements
If your lender believes the dwelling limit is too low, they may ask for additional coverage.
This is one reason it’s important to work with an experienced insurance agent who understands lender requirements.
What Happens If I Don’t Get Coverage?
If your insurance lapses, the lender may purchase insurance on your behalf.
This is called force-placed insurance.
Force-placed insurance:
- Is often much more expensive
- Usually protects only the lender
- May not cover your personal property
- May not provide liability protection
For most homeowners, obtaining a FAIR Plan and companion policy is far more affordable and provides significantly better protection.
[IMAGE PLACEHOLDER 3]
Alt Text: California home protected with FAIR Plan and companion policy coverage.
Frequently Asked Questions
Can I close a mortgage with a California FAIR Plan policy?
In many cases, yes. Lenders frequently accept FAIR Plan coverage when traditional insurance is unavailable.
Do I need a companion policy?
While not every lender specifically requires one, most homeowners benefit from having a companion policy because the FAIR Plan alone provides limited coverage.
Does the lender need to be listed on the policy?
Yes. The lender should be listed as the mortgagee on the policy.
Will escrow pay for my FAIR Plan insurance?
Often yes. Many mortgage companies will collect insurance premiums through escrow and pay the FAIR Plan and companion policy premiums on your behalf.
Need Help With a FAIR Plan Policy for Your Mortgage?
If you’ve been non-renewed or need insurance to satisfy a mortgage requirement, we can help.
Starwest Insurance Services specializes in:
- California FAIR Plan Policies
- Companion (DIC) Policies
- Homeowners Insurance
- Condo Insurance
- Landlord Insurance
- High Fire Risk Properties
We’ve helped homeowners throughout Orange County, Riverside County, Los Angeles County, San Diego County, and across California secure the coverage required by their mortgage lenders.
Contact James Cq Banh
📞 Office: 714-893-7271
📱 Text: 714-867-7799
Starwest Insurance Services
13752 Goldenwest Street
Westminster, CA 92683
No Broker Fees Since 1995