Missouri FAIR Plan

The Missouri FAIR Plan ensures that basic property insurance is available to all property owners, even those who cannot obtain coverage in the standard insurance market.

FAIR Plan Overview

What is the FAIR Plan?

FAIR = Fair Access to Insurance Requirements

Purpose:

• Provides basic property insurance for high-risk properties
• Ensures availability of essential fire coverage
• Serves as "insurer of last resort"
• Required by Missouri law to promote insurance availability

Statutory Authority:

• Created under Missouri Revised Statutes
• Administered by Missouri FAIR Plan Association
• Participation by all property insurers doing business in Missouri required
• Funded by assessments on participating insurers

Exam Tip: FAIR Plan stands for Fair Access to Insurance Requirements. It's the insurer of last resort for properties that cannot obtain standard market coverage. This is a common exam question.

Who Needs FAIR Plan Coverage?

High-Risk Properties:

Properties eligible for FAIR Plan typically include:

• Properties in high-crime areas
• Homes with poor loss history (multiple claims)
• Properties with deferred maintenance issues
• Older homes with outdated electrical/plumbing
• Properties insurer has declined to cover
• Homes in areas with limited insurance availability

FAIR Plan is NOT for:

• Properties with readily available standard market coverage
• First choice for insurance shopping
• Properties below minimum standards (must meet inspection criteria)

FAIR Plan Coverage

Available Coverage Types

Basic Property Coverage:

• Fire and lightning
• Extended coverage perils:
  • Windstorm and hail
  • Explosion
  • Riot and civil commotion
  • Aircraft and vehicles
  • Smoke
  • Vandalism and malicious mischief

Coverage NOT Included:

• Personal liability (Coverage E)
• Medical payments (Coverage F)
• Theft and burglary
• Personal property/contents (coverage is dwelling-focused)
• Additional living expenses

Exam Tip: Missouri FAIR Plan provides only basic dwelling fire and extended coverage perils. It does NOT include liability, theft, or contents coverage. Policyholders need to obtain these coverages separately if desired.

Coverage Limits and Structure

Dwelling Coverage:

• Insures structure to replacement cost or actual cash value
• Coverage A (dwelling) is primary coverage
• Coverage B (other structures) may be limited
• Maximum limits subject to FAIR Plan rules

Valuation:

• Replacement cost or actual cash value basis
• Property must be insured to at least 80% of value
• Coinsurance may apply

Deductibles:

• Standard deductibles apply ($1,000-$5,000 typical)
• Wind/hail deductible may be higher or percentage-based
• Higher deductibles available for premium savings

Eligibility and Application Process

FAIR Plan Eligibility Requirements

Step 1: Demonstrate Standard Market Unavailability

• Property owner must show proof of rejection from standard market
• Typically requires 1-2 declinations from standard insurers
• Declinations must be recent (within 30-60 days)

Step 2: Property Inspection

• FAIR Plan conducts physical inspection
• Property must meet minimum safety standards
• Repairs may be required before coverage granted

Step 3: Application Submittal

• Complete FAIR Plan application
• Provide proof of declinations
• Pay inspection fee
• Submit supporting documentation

Property Standards

Minimum Requirements:

• Structurally sound dwelling
• Functional roof in reasonable condition
• Working electrical and plumbing systems
• No significant code violations
• Property must be habitable and maintained

Unacceptable Conditions:

• Severe structural damage
• Condemned properties
• Vacant or abandoned buildings (exceptions may apply)
• Properties with extreme hazards

Exam Tip: Properties must meet minimum standards to qualify for FAIR Plan. The FAIR Plan is not required to insure properties that are not maintained or have severe deficiencies. An inspection is required.

FAIR Plan Premiums and Costs

Premium Determination

Higher Than Standard Market:

• FAIR Plan premiums typically 20-50% higher than standard market
• Reflects higher risk of insured properties
• Rates filed with Missouri Department of Commerce and Insurance
• Rates must be adequate but not excessive

Rating Factors:

• Property location and construction type
• Coverage amount and deductible
• Property condition and age
• Claims history
• Wind/hail exposure

Cost Structure

Premium Components:

• Base premium for dwelling coverage
• Extended coverage peril charges
• Wind/hail surcharge (if applicable)
• Policy fees and inspection fees

Payment Options:

• Annual payment (may offer small discount)
• Semi-annual payment
• Quarterly payment (with installment fees)
• No monthly payment option typically available

Transitioning from FAIR Plan

Returning to Standard Market

Improvement Opportunities:

• Complete recommended property improvements
• Establish claim-free history
• Reduce risk factors
• Shop standard market annually

Exit Strategies:

• Work with independent agents
• Apply to standard insurers after 1-2 years claim-free
• Demonstrate property maintenance
• Show improved risk profile

FAIR Plan as Temporary Solution:

• Not intended as permanent coverage
• Goal is to transition to standard market
• Annual review of standard market options recommended

Exam Tip: The FAIR Plan is intended as temporary coverage until a property can qualify for standard market insurance. Property owners should work to improve their property and risk profile to transition to better coverage at lower rates.

FAIR Plan Administration

Missouri FAIR Plan Association

Governance:

• Board of directors from participating insurers
• Overseen by Missouri Department of Commerce and Insurance
• Funded by assessments on all property insurers in Missouri

Responsibilities:

• Underwrite and issue FAIR Plan policies
• Conduct property inspections
• Handle claims
• Collect premiums
• Maintain financial solvency

Insurer Participation

Mandatory Participation:

• All property insurers licensed in Missouri must participate
• Participation proportional to market share
• Insurers share profits and losses of FAIR Plan
• Assessments used to cover claims and expenses

FAIR Plan vs. Standard Homeowners

Comparison Table

Exam Tip: Know the key differences between FAIR Plan and standard homeowners policies. FAIR Plan provides ONLY basic dwelling coverage with NO liability or theft protection. It's more expensive and serves as last resort coverage.

Consumer Protections

FAIR Plan Obligations

Required Services:

• Cannot arbitrarily refuse eligible properties
• Must provide timely inspections
• Must explain coverage and exclusions
• Must handle claims fairly
• Subject to Department of Commerce and Insurance oversight

Policyholder Rights:

• Right to appeal inspection findings
• Right to appeal coverage denials
• Right to file complaints with Department
• Right to policy renewal (subject to property standards)

Complaint Process

If issues arise with FAIR Plan:

1. Contact Missouri FAIR Plan Association directly
2. File complaint with Missouri Department of Commerce and Insurance
3. Consumer Hotline: (800) 726-7390
4. Online complaint filing: insurance.mo.gov