The recent wildfires in Southern California have highlighted the growing vulnerability of homeowners, particularly in high-risk areas like Truckee and the Tahoe Basin. Many homeowners, including myself, rely on the California FAIR Plan — California’s “insurer of last resort” — to provide coverage when no other insurer will. While the FAIR (Fair Access to Insurance Requirements) Plan offers fire protection, it has significant limitations, which homeowners need to understand.
According to Cal Fire incident maps, the FAIR Plan estimates its potential exposure at $4 billion for the Palisades Fire and $775 million for the Eaton Fire. As of March 2024, the FAIR Plan held approximately $200 million in surplus capital and $2.6 billion in reinsurance. If available funds fall short, all insurers operating in the state may be assessed to cover the gap. While the full impact remains uncertain, this could lead to higher premiums not just in California but nationwide.
Established in 1968, the California FAIR Plan was designed to offer insurance to homeowners who cannot secure coverage through traditional insurers, especially in wildfire-prone areas. For homeowners in Truckee and Tahoe, the FAIR Plan can provide essential coverage for fire damage, but it often falls short in key areas, exposing homeowners to financial risks if disaster strikes.
Key Shortcomings of the FAIR Plan
1. Actual Cash Value vs. Replacement Cost: Many FAIR Plan policies are issued on an actual cash value (ACV) basis rather than full replacement cost. ACV policies assign a depreciated value to your home based on age, which means a claims payout may not be enough to fully rebuild, leaving a significant financial gap.
2. Trust Issues: Homeowners who hold their property in a trust should be aware that if the trust is not listed as an additional insured on the policy, their claims could be denied. This is an often-overlooked detail that could be devastating.
3. Policy Limits and Increased Costs: The FAIR Plan has a maximum coverage limit of $3 million, which may not be sufficient for higher-value homes in the region.
4. Potential Premium Increases for All Policyholders: An additional challenge with the FAIR Plan is that if the pool of funds in the program is insufficient to cover all claims, an assessment may be imposed on insurance companies doing business in the state to make up the difference. This assessment could lead to premium increases for policyholders statewide, even those who live in areas not directly impacted by high wildfire risk.
The Insurance Challenges in Incline Village
For homeowners in Incline Village, the insurance landscape is even more difficult. The greater Reno/Tahoe area is experiencing carriers exiting the market, eliminating zip codes, and increasing premiums adjusting to increased costs. According to Laura Roche, Parasol Community Foundation program director, “We became aware of fire-related insurance concerns in 2021 and launched an insurance survey in 2022 to gather data from community members experiencing insurance challenges related to non-renewals or cancelations and premium increases.” That data was then shared with the Nevada Department of Insurance to bring awareness to the situation. Since that time, the Parasol Community Foundation has been in direct contact with the Nevada Insurance Commissioner and invited him to an interactive discussion with residents in 2024.
Unfortunately, Nevada is one of 17 states that does not have an “insurer of last resort” like the California FAIR Plan, meaning homeowners who can’t secure coverage through the standard market must turn to non-admitted excess and surplus insurers. These carriers are subject to less oversight and sometimes are willing to take on the risk that the standard market will not. Kevin Musico at The Musico Agency – Goosehead Insurance serves the Incline Village area and says “non-admitted carriers are subject to less oversight by the Nevada Department of Insurance when it comes to pricing. In this instance, non-admitted carriers can charge more to insure a home in a high-risk area without the need to get approval for a price increase from the state.”
There may be positive news on the horizon. Nevada State Sen. Pat Spearman has highlighted the challenges facing homeowners and the insurance market. In September of last year, Spearman sent Gov. Joe Lombardo a letter endorsing a Nevada Department of Insurance plan to conduct a feasibility study regarding the potential creation of a FAIR Plan for Nevada. According to Musico, a Nevada FAIR Plan has been discussed for years. However, he cautions that “the creation of a FAIR plan will take time and legislative action, so this is going to be a slow process.”
(left) iStockphoto.com/Jemastock; (right) iStockphoto.com/Bill Oxford
Steps Homeowners Can Take Now
Given the limited coverage and rising costs associated with the FAIR Plan in California and the challenges faced by Nevada homeowners, it’s important to take proactive steps to protect oneself:
1. Review Your Coverage Limits: Ensure your dwelling coverage (coverage A) is enough to rebuild your home, and your personal property coverage (coverage C) reflects the value of your belongings.
2. Create a Home Inventory: Pictures and video are an easy way to document your belongings and substantiate your claim in the event of a total loss.
3. Understand the Policy Type: If your policy is based on ACV, work with your broker to ensure your dwelling coverage is adequate to cover rebuild costs.
4. Purchase Supplementary Coverage: A difference in conditions (DIC) policy covers additional risks such as theft or water and ice damage.
5. Verify Trust Coverage: If your home is held in a trust, ensure that the trust is listed as an additionally insured on your policy. This is an important step to avoid potential claim denials.
6. Use an Insurance Broker: An experienced broker can help navigate non-admitted insurers and find the best coverage for your needs.
7. Invest in Home Hardening: While it may not directly affect your policy, creating defensible space and using fire-resistant materials can help protect your home from wildfires and may reduce your premiums.
Community-Wide Efforts for Wildfire Resilience
The increasing severity and frequency of wildfires will continue to reshape the insurance industry and underscore the need for community-wide mitigation efforts. The Truckee Fire Protection District has developed a Community Wildfire Protection Plan to evaluate fire risks and prioritize strategic mitigation efforts. In the Lake Tahoe Basin, the Tahoe Fires and Fuels Team — a coalition of 21 federal, tribal, state, and local conservation, land management, and fire agencies — works collaboratively to reduce wildfire risk. In February 2025, the Lake Tahoe Basin Community Wildfire Protection Plan was updated to address the region’s evolving wildfire threats. “The importance of these local collaboratives taking collective action and having the tools and capabilities to plan, act, measure, monitor, and accurately show the risk reduction that has been and will be achieved through targeted and thoughtful wildfire mitigation is crucial,” said Eric Horntvedt, TFPD wildfire prevention manager. “We need the entire community to dive into this issue and to take active stewardship action to create a wildfire resilient Truckee.”
One of the most effective ways to create resilience and reduce wildfire risk is by removing excess vegetation. Truckee Fire uses mechanical thinning, fuel breaks, and defensible space programs to manage hazardous fuels.
By understanding the limitations of available plans, reviewing coverage options, and working with an experienced broker, homeowners can better protect their properties and families from the financial impact of wildfires and other catastrophic events.
