2.2 Indiana FAIR Plan

What the FAIR Plan Is

The Indiana FAIR Plan — legally the Indiana Basic Property Insurance Underwriting Association (IBPIUA) — was established October 28, 1968 to make basic property insurance available to owners who cannot secure it in the normal (voluntary) market. FAIR stands for Fair Access to Insurance Requirements. It is a residual or shared market: every insurer licensed to write property coverage in Indiana is a member, shares in the plan's premiums and losses, and is assessed in proportion to its market share of property business in the state.

The FAIR Plan exists precisely because some properties are hard to insure — but it is deliberately structured to be a last resort, not a cheap alternative to standard carriers. Coverage is narrower and rates are often higher than the voluntary market.

Eligibility: The Three-Declination Rule

Before the plan will issue, an applicant generally must show the risk is genuinely uninsurable in the voluntary market:

"Non-related" matters: three declinations from three subsidiaries of the same parent group would not satisfy the rule. The point is to confirm the broad market has truly turned the risk away.

The FAIR Plan does not require the property to be in a particular geographic zone — it covers risks statewide. What it screens for is genuine unavailability in the voluntary market plus a property that is not so deteriorated or hazardous that it is uninsurable on any basis (for example, a structurally unsound or condemned building can still be rejected). Eligibility is about access, not a guarantee of acceptance.

Coverage Limits and Perils

The FAIR Plan caps how much it will write so it does not compete with the voluntary market:

Protection is essentially a fire and extended-coverage (named-perils) form, covering:

• Fire and lightning
• Windstorm and hail
• Explosion
• Riot and civil commotion
• Smoke
• Vehicles and aircraft
• Vandalism and malicious mischief
• Weight of snow and ice; certain water/water-hazard losses (not flood)

What the FAIR Plan does not do is just as testable. It typically excludes or limits liability coverage, theft of personal property, flood, and earthquake, and it does not provide the broad "open-perils" protection of an HO-3. An applicant who needs liability or theft usually must add it elsewhere or accept the gap.

Why High-Risk Properties End Up Here

Common reasons a property lands in the FAIR Plan:

• Location — high-crime neighborhoods or areas prone to brush/wildfire
• Age or condition — old wiring, poor roofs, deferred maintenance
• Loss history — repeated prior claims
• Occupancy — vacant or seasonal buildings the voluntary market avoids

FAIR Plan vs. the Voluntary Market and Surplus Lines

Students must place the FAIR Plan correctly among the markets a producer can use:

The FAIR Plan and surplus lines both serve hard-to-place risks, but the FAIR Plan offers only basic, capped property coverage, while surplus lines can tailor broad coverage and far higher limits. A producer who needs $5,000,000 on an unusual warehouse turns to surplus lines, not the FAIR Plan, whose commercial cap is $1,000,000.

Applying and Producer Responsibilities

Any producer licensed in Indiana can submit a FAIR Plan application; the agent acts as a conduit to the residual market rather than to a single carrier. Typical submission rules:

• Photographs of the property are usually required so the association can underwrite a risk it has never seen
• A premium deposit accompanies the application (commonly a partial deposit such as 25%)
• No binding authority — producers generally cannot bind the FAIR Plan; coverage is effective only when the association accepts and issues
• Applicants must disclose prior cancellations, losses, and the declinations that establish eligibility

Because there is no binding authority, a producer must never tell a client they are "covered" the moment the application is signed. Coverage gaps between application and issuance are a frequent source of errors-and-omissions claims.

Common Exam Traps

• FAIR ≠ flood. The FAIR Plan is a basic property residual market; flood still requires the NFIP or private flood coverage.
• Memorize the two limits as a pair: $250,000 dwelling / $1,000,000 commercial.
• The plan is funded by member-insurer assessments, not by the state's general fund or taxpayers.
• Three declinations must come from non-related insurers, and the FAIR Plan is a last resort, not a discount option.

Exam Tip: If a question describes a homeowner repeatedly turned down by standard carriers because the house is old or in a high-crime area, the answer is the FAIR Plan — and the limit clue ($250,000) confirms it.