When standard insurers won’t write a home, two doors are usually left. The FAIR Plan is a pool created under state law; the NAIC says the private insurers in that state back it financially and share its profits, losses and expenses by market share. A surplus lines insurer is a private company that isn’t admitted in your state but can write there through a surplus lines broker. Washington says it isn’t allowed to review surplus lines rates and policies, and the NAIC says guaranty fund coverage isn’t available to surplus lines policyholders. FAIR Plan policies often start with basic dwelling coverage, and from 2020 to 2022 California counted about one admitted difference-in-conditions policy for every two FAIR Plan policies.
Who stands behind each one
The NAIC calls FAIR Plans state-mandated and backed by all private insurers allowed to write insurance in the state, each sharing profits, losses and expenses by market share. California’s Plan of Operation makes every property and casualty insurer there a member, taking part in proportion to premiums written. In Texas, if the plan runs a deficit, the Commissioner directs it to request public securities or assess member insurers by their share of the residential market. Not every state has one: the NAIC says that as of October 2024, 33 states had some sort of residual market plan.
A surplus lines policy comes from one private insurer that isn’t admitted in the state; federal law calls it a nonadmitted insurer. Texas still approves which surplus lines companies can do business there, and California lists one only after it shows minimum capital and surplus.
Side by side
- What it is: FAIR Plan: a state-mandated pool backed by the state’s private insurers. Surplus lines: one private insurer not admitted in your state but eligible to write there.
- How you get in: FAIR Plan: usually proof of denial from at least two private insurers, per the III. Surplus lines: through a surplus lines broker after admitted insurers are tried; California counts three admitted declinations as evidence of the required diligent search.
- Rates and forms: FAIR Plan: California’s rates need the Commissioner’s prior written approval, and Texas’s Commissioner approves its policy forms. Surplus lines: Washington says it isn’t allowed to review their rates and policies, and Florida policies must say their rates and forms aren’t approved by any Florida regulatory agency.
- Typical coverage: FAIR Plan: usually at least the dwelling; the NAIC says loss of use and personal liability generally aren’t offered, though Texas’s homeowner form includes liability and its plan lists a loss-of-use limit. Surplus lines: set by the policy; Washington urges reading its terms carefully.
- Who oversees it: FAIR Plan: Texas’s Commissioner appoints its governing committee; California’s approves its underwriting guidelines. Surplus lines: for U.S. insurers, their state of domicile, per the NAIC.
- If money runs short: FAIR Plan: member insurers share losses and can be assessed in California and Texas. Surplus lines: no guaranty fund coverage, says the NAIC, and Texas, Washington, California and Florida agree.
- Whose rules apply: FAIR Plan: the plan of the state where the home sits. Surplus lines: under federal law, only the insured’s home state, which for an individual is generally the principal residence.
What the policy usually looks like
California’s dwelling policy is named-peril, covering only listed causes of loss such as fire and lightning, internal explosion and smoke, with vandalism and malicious mischief extra. Texas’s homeowner form adds theft and liability, but the plan can’t include wind and hail in the designated coastal catastrophe area, where that comes through the Texas Windstorm Insurance Association. Limits are capped: $3 million at one location for California’s Division I fire and allied lines policies unless its governing committee’s guidelines allow more, and $1,000,000 on the dwelling in Texas.
Surplus lines forms aren’t pre-approved in Washington or Florida, so read each one closely. Washington says surplus lines is used when other insurers won’t offer coverage because of high risk, such as a home on a steep bank or an extremely old home. Texas warns of fewer consumer protections.
Getting into each one
FAIR Plan eligibility varies by state. Texas wants at least two declinations from insurers writing residential property there, no valid comparable offer from an admitted Texas insurer (a surplus lines offer doesn’t count), and a fresh try in the voluntary market every two years. The house counts too: California inspects it and finds it eligible, possibly with a surcharge, eligible once listed improvements are made, or not eligible.
For surplus lines, the admitted market comes first. California requires a diligent search, with three declinations from admitted insurers that write the coverage as the statute’s evidence of one. Texas says an agent must first try to find an admitted Texas company. Under 15 U.S.C. 8202 the placement follows only the home state’s rules, and under 8201 no other state may require premium tax on it. The broker remits that tax to the home state, the NAIC says.
Pairing a FAIR Plan with a DIC policy
California’s FAIR Plan suggests adding a difference-in-conditions, flood or earthquake policy. The Department of Insurance calls DIC wrap-around coverage for perils an HO-3 commonly includes but the FAIR Plan doesn’t, such as water damage, theft and liability. From 2020 to 2022 it counted about one DIC policy for every two FAIR Plan policies, counting only the admitted market and noting more may be in surplus lines. A surplus lines DIC is still surplus lines, and California says its guarantee association doesn’t apply to surplus line insurers. How a FAIR Plan and a DIC fit together.
What decides it
- What it has to cover. If you need liability, theft or water damage, check your state’s FAIR Plan form.
- What the home is worth. Check the rebuild cost against your state’s FAIR Plan limits. High-value home insurance.
- How much backing matters. A pool the state’s insurers share, or one private insurer with no guaranty fund behind it.
- Whether the house qualifies. A FAIR Plan can decline after inspection, and in Texas a surplus lines offer doesn’t end FAIR Plan eligibility.
When standard insurers say no, I look at both routes for the same house and lay out what each form leaves out. See admitted vs. surplus lines and what a FAIR Plan is.
Common questions
Is a FAIR Plan a government insurer?
Not exactly. It is created under state law, but the NAIC says the private insurers in the state back it financially and share its profits and losses. In California and Texas the Commissioner also approves its rates or forms, and member insurers can be assessed if it runs short.
Does a state guaranty fund back a surplus lines home policy?
No. The NAIC says guaranty fund coverage isn’t available to surplus lines policyholders, and Texas, Washington, California and Florida say the same, so the insurer’s own financial strength is what stands behind a claim.
Do I have to be turned down before using either one?
Usually. The III says FAIR Plans usually want proof of denial from at least two private insurers, and in California a surplus lines placement needs a diligent search of the admitted market, which three declinations from admitted insurers writing that coverage establish. The exact rules vary by state.
Can I have a FAIR Plan and a surplus lines policy at the same time?
Yes. A difference-in-conditions policy can sit alongside a FAIR Plan to add perils it leaves out, and California’s Department of Insurance notes that some DIC policies may be written in the surplus lines market.
Which state’s rules apply to a surplus lines home policy?
Your home state’s. Federal law makes the placement subject only to the insured’s home state, which for an individual is generally the principal residence, and no other state may require premium tax on it.
Sources
- NAIC: Fair Access to Insurance Requirements (FAIR) plans
- NAIC: Surplus lines
- Insurance Information Institute: What are FAIR Plans?
- 15 U.S.C. 8201: reporting, payment and allocation of premium taxes (Cornell LII)
- 15 U.S.C. 8202: regulation of nonadmitted insurance by insured’s home state (Cornell LII)
- 15 U.S.C. 8206: definitions (home state, nonadmitted insurer) (Cornell LII)
- California Department of Insurance: Fact Sheet, Summary on Residential Insurance Policies and the FAIR Plan (updated June 21, 2024)
- California Department of Insurance: notice to brokers on surplus lines and the FAIR Plan in high-risk wildfire areas (Oct. 19, 2015)
- California Insurance Code 1763: diligent search before a surplus line placement (via california.public.law)
- California Department of Insurance: Commercial Insurance Guide (surplus line insurers and CIGA)
- California FAIR Plan: Dwelling policy
- California FAIR Plan Association: Plan of Operation (Ed. 9/3/25)
- Texas Department of Insurance: Texas FAIR Plan Association Overview (October 1, 2026, quarter ending June 30, 2026)
- Texas Department of Insurance: Surplus lines insurance guide
- Washington Office of the Insurance Commissioner: Surplus line insurance
- Florida Statutes 626.924 (2026): information required on surplus lines contracts
General information about FAIR Plans and surplus lines home insurance as of October 2026, not legal or tax advice; each state’s FAIR Plan rules, insurance code and the policy itself control. Coverage depends on underwriting and the terms, conditions and exclusions of the policy actually issued.