Last July, I wrote a short post warning South OC buyers that rising homeowners insurance costs were starting to affect purchase decisions, especially in hillside and canyon neighborhoods. At the time, I told buyers to get quotes early, budget for higher premiums, and understand that the FAIR Plan might be their only option in some areas.
A year later, I need to update that post — because the situation hasn't just continued, it's accelerated in ways that changed how I advise clients on this specific issue. This isn't a minor footnote anymore. For some South OC buyers, insurance has become the single biggest wildcard in their monthly housing cost.
Key Takeaways
- Average California homeowners insurance premiums rose roughly 84% between the end of 2020 and March 2026 — and deductibles climbed right along with them, from an average of $1,813 to $2,553.
- FAIR Plan enrollment surged 43% between September 2024 and December 2025 alone, and now covers about 5% of California's single-family homes, up from just 1.5% at the end of 2020.
- 14% of current FAIR Plan policies now cover properties in largely urban, lower-fire-risk zones — meaning this is no longer just a hillside or canyon problem.
- New legislation (the "Make It FAIR Act," AB 1680) is aimed at improving FAIR Plan customer service, claims handling, and transparency — a direct response to the plan's rapid growth.
- The FAIR Plan alone doesn't cover everything a standard policy does — you'll likely need a separate Difference in Conditions (DIC) policy, and that added cost needs to be part of your homebuying math from day one.
What I Said Last Year vs. What's True Now
Last year's post was, honestly, a general heads-up. I told buyers insurance was rising and that the FAIR Plan existed as a backstop for hard-to-insure homes. That was accurate at the time, but it undersold how fast this was moving.
Here's the update: seven of California's twelve largest home insurers have reduced or halted new underwriting in the state in recent years, which has pushed an enormous amount of risk onto the broader insurance pool — and increasingly, onto the FAIR Plan itself. FAIR Plan enrollment grew 43% in just fifteen months between September 2024 and December 2025. It now backs roughly 6% of new single-family mortgage originations statewide. This isn't a niche product anymore; it's becoming a mainstream part of how California homes get financed.
And the part that surprised even me: 14% of current FAIR Plan policies are now in largely urban, lower-fire-risk areas — not the hillside and canyon zones I focused on last year. The insurance market has tightened broadly enough that even buyers in flatter, lower-risk South OC neighborhoods are increasingly finding standard carriers pulling back or pricing themselves out of reach.
What This Actually Costs a South OC Buyer
Numbers make this real in a way a general warning doesn't. For a buyer financing a $1.5 million home with 20% down, the gap between a standard policy running around $2,500 a year and a FAIR Plan plus DIC package running closer to $10,000 a year works out to roughly $625 a month in additional cost. That's not a rounding error — that's enough to meaningfully change what a buyer can qualify for, because lenders factor your insurance premium directly into your debt-to-income ratio.
I now tell every single buyer looking at a home anywhere near open space, hillside terrain, or canyon topography — think Coto de Caza, parts of Rancho Santa Margarita, Laguna Niguel's canyon-adjacent tracts — to get an actual insurance quote before they're deep into their offer, not after. It's no longer safe to assume "I'll figure out insurance later." Later might mean your loan doesn't work the way you expected.
What the FAIR Plan Covers — and What It Doesn't
If you do end up on the FAIR Plan, it's important to understand its real scope. The FAIR Plan covers fire, lightning, internal explosion, and smoke damage to your dwelling. That's it. It does not cover personal liability, theft, contents, water damage, additional living expenses if you're displaced, or building code upgrade costs.
That's why a standalone FAIR Plan policy usually needs to be paired with a Difference in Conditions (DIC) policy from a separate carrier to fill those gaps — liability, contents, loss of use. Budgeting for "the FAIR Plan premium" without also budgeting for the DIC wrap-around is one of the most common mistakes I see buyers make, and it's exactly the surprise-cost scenario that turns an already-tight monthly budget upside down after closing.
What's Actually Changing at the Policy Level
There's real movement on the legislative side, which is worth knowing about even if it won't change your insurance bill this year. California's Insurance Commissioner and state legislators introduced the "Make It FAIR Act" (AB 1680), aimed at improving FAIR Plan customer service, claims handling speed, and transparency — a direct acknowledgment that the plan's rapid growth has outpaced its infrastructure. It won't lower premiums by itself, but it signals that regulators recognize the FAIR Plan has become too central to the market to leave unreformed.
What I Tell Buyers Now
Get an actual, address-specific insurance quote before you're deep into your offer — not a general area estimate. Ask specifically whether the property will qualify for a standard admitted carrier or whether you're likely headed to the FAIR Plan. If it's the latter, get a DIC quote at the same time, not after you've already signed. And build both numbers into your total monthly housing cost calculation alongside your mortgage payment — the same way you'd think about what a given price point actually buys you in South OC right now, insurance has become part of that real affordability math, not an afterthought.
This also connects directly to what buyers and sellers should expect around closing costs more broadly — insurance premiums increasingly show up as a line item that shifts the whole affordability conversation, not a small add-on at the end.
Frequently Asked Questions
Is the FAIR Plan only for homes in high wildfire-risk areas?
Not anymore. While it's still most common in hillside and canyon areas, roughly 14% of current FAIR Plan policies now cover properties in largely urban, lower-fire-risk zones — a sign of how much standard carriers have pulled back statewide.
Do I need a separate policy in addition to the FAIR Plan?
Almost always, yes. The FAIR Plan only covers fire, lightning, internal explosion, and smoke damage. You'll typically need a Difference in Conditions (DIC) policy to cover liability, theft, contents, water damage, and additional living expenses.
How much more expensive is FAIR Plan coverage compared to standard insurance?
It varies by property, but a common comparison is a $2,500/year standard policy versus a $10,000/year FAIR Plan plus DIC package for the same home — a difference that can run around $625/month when spread across a mortgage payment.
Will insurance premiums affect my loan approval?
Yes. Lenders include your homeowners insurance premium in your debt-to-income ratio calculation, so a significantly higher premium can reduce your effective purchasing power or affect approval on a marginal file.
Is anything being done to fix the FAIR Plan?
Yes, though it's a work in progress. The "Make It FAIR Act" (AB 1680) is aimed at improving FAIR Plan customer service, claims handling, and transparency in response to its rapid enrollment growth. It doesn't lower premiums directly, but it signals regulatory attention to the issue.
If you're house hunting in South Orange County right now, don't wait until you're in escrow to find out what insurance is going to cost you. I work with trusted local insurance advisors who can get you a real, address-specific quote early — reach out and I'll make the introduction before you write an offer, not after.
—Bryan
