What Is a Wrap Policy, and Why Does the California FAIR Plan Need One?

A wrap policy is a second insurance policy that sits next to the California FAIR Plan and covers what the FAIR Plan leaves out. Its formal name is a difference in conditions policy, or DIC. Most people call it a wrap, because it wraps around the FAIR Plan to fill the gaps.

If you've been asking what a wrap policy is and why the California FAIR Plan needs one, the short version is this: the FAIR Plan by itself is about half of a homeowners policy. The wrap is the other half.

Darlene Baxter is a licensed California insurance agent and owner of Darlene Baxter Insurance Agency in Pleasant Hill, CA, helping homeowners, families and business owners get covered with real choices: their main company first, and other companies through the brokerage when it isn't the right fit. Her team sets up FAIR Plan and wrap policies together for homes in high fire areas.

The FAIR Plan is California's insurer of last resort. It exists for homes that regular insurance companies won't take, which today means a lot of homes in high fire areas.

It covers fire, plus a short list of other damage depending on the options on your policy. That's the part most people on the FAIR Plan need most, and it's why the FAIR Plan exists.

A lot of what a regular homeowners policy includes. The three that matter most:

• Liability. If someone gets hurt on your property and blames you, the FAIR Plan doesn't protect you.
• Theft. A break-in isn't covered.
• Water from a burst pipe. Sudden water damage inside the home isn't covered.

Those are the gaps the wrap policy fills. With both policies in place, the two together work much like a standard homeowners policy.

Neither one covers earthquake. That takes separate earthquake insurance, the same as for any California home.

If your home is on the FAIR Plan, yes, in almost every case. With the FAIR Plan alone, a guest's injury, a burglary or a burst pipe would be yours to pay for.

People sometimes buy the FAIR Plan by itself to get past a deadline and plan to add the wrap later. Later often doesn't happen. We set the two up together so the coverage lines up from the first day.

The frustration is fair. You're paying for two policies to get back to where one policy used to take you. A lot of homeowners have told Darlene the FAIR Plan feels like "the unfair plan." It isn't the first choice. It's what keeps a home insured when the regular companies have said no.

They're two separate policies, and you'll see two bills. When something happens, the kind of damage decides which policy responds: fire goes to the FAIR Plan, and the things it leaves out go to the wrap.

You don't have to sort that out alone. If you have a claim, call us first and we'll point you to the right policy.

Our FAIR Plan and wrap policy page has a picture that shows how the two fit together, and it walks through what to expect when you call.

Sometimes. It depends on your home and on which companies are taking homes in your area at the time. New companies have been coming into California, and what's available changes from year to year.

We offer a review at every renewal. If a regular homeowners policy opens up for your home, you'll hear about it, and one policy can replace the two. The review step in our process shows how that works. If your home was recently non-renewed, our post on what to do when your insurance is canceled or non-renewed covers the steps before the FAIR Plan.

Darlene Baxter is a licensed California insurance agent and owner of Darlene Baxter Insurance Agency in Pleasant Hill, CA, helping homeowners, families and business owners get covered with real choices: their main company first, and other companies through the brokerage when it isn't the right fit.

We start with regular companies. If none will take the home right now, we set up the FAIR Plan and the wrap together and help with both applications. We can't promise approval or a price. Those decisions belong to the insurance companies.

Call the office at (925) 940-6970 or send us a message, and tell us about your house. If you're still wondering what a wrap policy is and whether your California FAIR Plan needs one, we'll go through it with you in plain words.