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FAIR Plan and DIC Policies for LA Rental Property Owners

FAIR Plan and DIC Policies for LA Rental Property Owners

If you own rental property in Los Angeles and your carrier has nonrenewed your policy—or you’ve been told your property is too close to a brush zone for standard coverage—you’ve probably heard about the California FAIR Plan. You may have also heard that a FAIR Plan policy alone isn’t enough.

That’s accurate. Here’s how the FAIR Plan works, what it doesn’t cover, and how a Difference in Conditions (DIC) policy fills the gap for LA landlords.

What Is the California FAIR Plan?

The California FAIR Plan is a shared market pool created by the state to provide basic property insurance to homeowners and property owners who can’t obtain coverage in the standard market. It’s not a government agency—it’s an association of insurers licensed to write property insurance in California, and they’re all required to participate.

For rental property owners, the FAIR Plan offers dwelling fire coverage. That means it covers damage from fire, lightning, internal explosion, and smoke. Some additional perils can be added, but the base policy is considerably narrower than what a standard landlord or rental property policy provides.

The California Department of Insurance provides detailed information about the FAIR Plan and eligibility requirements.

What the FAIR Plan Does NOT Cover

This is the critical point. A FAIR Plan policy by itself leaves significant gaps for a rental property owner:

  • No liability coverage: If a tenant or visitor is injured on your property and sues you, the FAIR Plan doesn’t respond. This is a serious gap for any landlord.

  • No loss of rents: If your property is damaged and uninhabitable, a FAIR Plan policy won’t cover your lost rental income while repairs are underway.

  • Limited perils: Water damage (from a burst pipe, appliance failure, or similar), theft, vandalism, and other perils common to standard landlord policies are generally not covered by the FAIR Plan base policy.

  • No contents coverage for landlord-owned property: Appliances, fixtures, or other items you own inside the rental may not be covered.

For a landlord with tenants in place and a mortgage on the property, these gaps are not acceptable as a permanent solution.

What Is a DIC Policy and How Does It Work?

A Difference in Conditions (DIC) policy is designed specifically to wrap around the FAIR Plan and cover what it misses. The combination of a FAIR Plan policy (fire perils) plus a DIC policy (everything else) is the standard approach for California landlords who can’t access the standard market.

A DIC policy typically adds:

  • Liability coverage (usually $100,000–$300,000 or more)

  • Loss of rents / fair rental value coverage

  • Broad form perils coverage (water damage, theft, vandalism, etc.)

  • Additional structures coverage

The combined cost of a FAIR Plan policy plus a DIC policy will almost always be higher than what you were paying for a standard landlord policy. But for properties that can’t get standard coverage, it’s the right solution—and it keeps your property insured, your lender satisfied, and your liability exposure covered.

Who Needs a FAIR Plan + DIC Combination?

In Los Angeles, you may find yourself in this situation if:

  • Your property is in or near a high fire hazard severity zone (many hillside, canyon, and foothill neighborhoods in LA qualify)

  • Your standard carrier has nonrenewed or declined to write your property

  • Your property is in a ZIP code that multiple carriers have flagged as ineligible

  • You’ve had a recent fire claim that makes you ineligible with standard carriers

This is increasingly common across LA County—not just in outlying areas. Neighborhoods like Brentwood, Pacific Palisades, Altadena, La Crescenta, and others have seen significant nonrenewal activity. The California Department of Insurance’s Wildfire Resource Page has resources for property owners navigating this situation.

Does Your Lender Accept a FAIR Plan Policy?

Generally yes—most mortgage lenders and DSCR loan lenders will accept a FAIR Plan policy combined with a DIC, as long as the combined coverage meets their requirements (dwelling coverage at replacement cost, lender listed as mortgagee, required liability limits). However, documentation requirements matter. Make sure your broker provides binder documentation that clearly shows both policies and that the lender’s requirements are satisfied by the combination.

If you’re also carrying an umbrella or excess liability policy, confirm it will sit above the DIC policy’s liability limits—some umbrella carriers require specific underlying policy formats.

Is the FAIR Plan a Long-Term Solution?

The FAIR Plan is meant to be a market of last resort, not a permanent home. Many landlords end up there for years when the standard market doesn’t come back for their area. If you’re placed through the FAIR Plan, ask your broker to check the standard market periodically—especially as carriers adjust their underwriting guidelines or as your property’s risk profile changes (e.g., brush clearance completed, roof replaced, updated fire mitigation measures).

Working with an independent broker like Broadway Insurance Services means someone is watching the market on your behalf, not just waiting for your annual renewal.

This post is general information and is not legal or insurance advice. FAIR Plan eligibility, coverage terms, and DIC policy terms vary. Consult a licensed insurance professional for guidance specific to your property and situation.

FAIR Plan Coverage Questions? We Can Help.

Broadway Insurance Services works with Los Angeles landlords navigating the FAIR Plan and surplus markets every day. We know how to put together a FAIR Plan + DIC combination that actually covers what you need—and satisfies your lender.

See our landlord insurance approach, explore our rental property insurance options, or reach out to us directly. We’re here to help you find real coverage, not just a policy that looks good on paper.

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