The Texas Fair Plan: What It Is and What It Covers
The Texas FAIR Plan Association (TFPA) was created by state law to provide residential property insurance for people who are unable to get coverage through the regular private insurance market.
Policyholders should understand that, as a market of last resort, coverage available through the TFPA is not as comprehensive as most coverage available through the voluntary market. Therefore, it’s imperative to know what you’re getting. This post teaches you the basics.
Key Takeaways
- The Texas FAIR Plan provides limited residential insurance for people who can’t get a policy through the private market.
- It provides homeowners, dwelling, condo, and tenant (i.e., renters) insurance.
- The average annual cost for a homeowners insurance policy through the Texas FAIR Plan is around $1,440.
- The Texas FAIR Plan doesn’t cover windstorm, hail, and hurricane damage in Texas’ 14 coastal counties and in the portion of Harris County located east of State Highway 146 on Galveston Bay.
The Purpose of the Texas FAIR Plan Association
In 1995, the Texas Legislature passed a law authorizing the establishment of a Texas Fair Access to Insurance Requirements (FAIR) Plan to address
growing concerns about the difficulty of obtaining residential property insurance coverage in underserved areas.
In 2002, the Texas Commissioner of Insurance activated the FAIR Plan in response to a mold crisis. Claims for mold damage exceeded over $2 billion that year, and insurers in the state ended up paying out over $215 million. As a result, several major insurers pulled out of the Texas insurance market, which left Texans struggling to find coverage. The Texas FAIR Plan Association (TFPA) became the insurer of last resort for property owners unable to obtain coverage elsewhere.
Who Qualifies for the Texas FAIR Plan
To qualify for a Texas FAIR Plan policy, applicants have to meet the following criteria defined by the Texas Legislature:
- You must have been denied coverage by at least two insurance companies licensed to write – and currently writing – residential property insurance policies in Texas. (Applicants are required to provide proof they’ve been declined with this form.)
- You cannot have a current homeowners or other residential property policy, a renewal offer, or a valid offer of comparable residential property insurance from another insurance company licensed to operate in Texas.
An applicant’s property must also meet certain eligibility requirements. It can’t be condemned, vacant, or in disrepair. Applicants can’t have more than eight paid insurance claims within the past three years or have been convicted for arson, fraud, or any other insurance-related offense.
Policy Types Provided by the TFPA
The TFPA provides four types of policies:
- Homeowners Insurance
- Dwelling Insurance
- Condominium Insurance
- Tenant (i.e., Renters) Insurance
The TFPA does not insure commercial properties.
What the Texas FAIR Plan Covers
Texas FAIR Plan policies provide very limited coverage compared with regular open market insurance policies. Plans can cover the following:
Hazard Coverage
Hazard coverage includes coverage for:
- Fire
- Lightning
- Sudden and accidental damage from smoke
- Windstorm and hail
- Explosions
- Aircraft and vehicles
- Riot and civil commotion
- Vandalism and malicious mischief
- Theft
While all of these perils are included in homeowners, condo, and tenant policies, everything except fire and lightning coverage is optional in the dwelling policy and must be added as additional endorsements. Windstorm and hail coverage are excluded for properties in Texas’ 14 first-tier coastal counties.
Personal Property Coverage
All four policies provide actual cash value coverage for personal property in your household, such as clothing, furniture, and appliances. (Business personal property, jewelry, watches, furs, and money may be excluded.) Replacement cost coverage is available at an additional premium for homeowners, condo, and tenant policies but not for dwelling policies.
The total insurable value maxes out at 50% of the total value of the house for the homeowners and dwelling policies. That total can be increased for homeowners policies for an additional premium. The condo and tenant policies provide coverage at selected limits up to a maximum of $500,000.
Liability Coverage and Loss of Use Coverage
Homeowners, tenant, and condo policies include coverage for personal liability and medical payments if someone is injured on your property. Liability is capped at $100,000 or $300,000 depending on coverage choice, and medical payments are limited to $5,000 per person or $25,000 per occurrence.
Loss of Use coverage can pay for additional living expenses if your home is temporarily uninhabitable.
What Isn’t Covered by the Texas FAIR Plan
TFPA coverage is limited to named perils, unlike a general “all risk” homeowners insurance policy, so there are many other possible sources of damage that aren’t covered. These include:
- Falling objects, such as trees or branches
- Full or partial building collapse
- Broken glass
- Damage from the weight of ice, snow, or sleet
- Frozen pipes
- Damage to HVAC or sprinkler systems
- Mold, fungi, or other microbe remediation costs
- Backup from drains or sewers
Does the Texas Fair Plan Cover Windstorm Damage?
Many Texas Fair Plan policies do cover windstorm damage, but the TFPA does not provide windstorm, hurricane, or hail coverage for properties located in designated catastrophe areas. This includes all 14 first-tier coastal counties (Aransas, Brazoria, Calhoun, Cameron, Chambers, Galveston, Jefferson, Kenedy, Kleberg, Matagorda, Nueces, Refugio, San Patricio, and Willacy) and a portion of Harris County located east of State Highway 146 on Galveston Bay. Texas Department of Insurance records show that over 58% of TFPA policies are for properties in Harris County.
Pursuant to Texas Insurance Code §2211.156, any policy written by the TFPA for a property in these areas must include a Windstorm and Hail Exclusion Agreement attached to the policy. Residents who live in these areas can purchase windstorm, hurricane, and hail insurance through the Texas Windstorm Insurance Association (TWIA). If you reside in a TWIA coverage area, yet qualify for TFPA, you may carry both policies.
TFPA Policy Terms and Renewals
TFPA policies are issued for a one-year term, subject to underwriting standards. Policyholders are required to reapply for residential property insurance through the open market every two years.
After two years of coverage, policyholders are eligible to renew with the TFPA if:
- At least two insurance companies licensed to write — and actually writing — Texas residential policies decline your application; and
- You don’t receive a valid offer of comparable property insurance from an insurance company licensed in Texas.
FAQs about the Texas FAIR Plan
Does TFPA Cover Vandalism?
TFPA homeowners, condo, and tenant policies provide coverage for vandalism and malicious mischief. For dwelling policies, coverage needs to be purchased as an additional endorsement.
What Types of Properties are Eligible for the Texas Fair Plan?
The Texas FAIR Plan provides limited coverage for the following types of properties:
- One- and two-family residential dwellings
- Townhouse units
- Condominium units
- Manufactured housing
Does the Texas Fair Plan Insure Mobile Homes?
The Texas Fair Plan provides coverage for manufactured homes. This includes mobile homes, provided that the wheels are removed and the mobile home is tied down. See this TFPA form for more information about submitting an application for a policy to cover a mobile home.
Can I Get Flood Insurance through the Texas FAIR Plan?
The Texas FAIR Plan does not provide flood insurance. To get flood insurance, you’ll need to purchase a policy through the National Flood Insurance Program (NFIP) or from a private insurer.
Further Resources on Insurance Coverage Law
Navigating the complexities of insurance claims can feel overwhelming. Whether you’re facing unpaid claims or simply filing for the first time, our eBooks equip you with the crucial information you need to advocate for yourself with confidence.
- Filing A Property Insurance Claim
- Insurance Company Response Time
- What To Do When You Have a Denied/Underpaid Claim
- Wildfire Claims
- Flood Claims Handbook
- More Information on Hurricane Deductible and Policy Limits
- Condominium Hurricane Preparedness
Why Merlin?
Are you fighting an insurance company that won’t pay up on claims? With nearly 40 years of practice and $2 billion in recovered claims, our team stands by your side to ensure you can face any insurance challenge with confidence. Contact us today for a consultation, or read more about how we’re your trusted advocate.