FAIR Plan Fair Rental Value (FRV): Don't Get Cheated!
Understanding your "loss of use" coverage is crucial when your home is uninhabitable due to damage.
While most insurance policies offer "additional living expenses" (ALE), the California FAIR Plan uses a different approach: "Fair Rental Value" (FRV). This guide will help you navigate FRV and avoid common pitfalls.
Understanding Fair Rental Value (FRV):
What it is: FRV is the rental value of your home if you were renting it to a third party. It's not based on your actual rental history or your current housing expenses.
Uninhabitable Home: Even if you're staying with family and not incurring housing costs, you're still entitled to FRV if your home is unfit to live in.
Stated Limit: Your policy has a "stated limit" for FRV, ranging from $0 to a specific dollar amount.
The $0 Stated Limit Secret:
Coverage Exists: Policies with a $0 stated limit do have coverage.
How to Access It: You can draw FRV from:
10% of the Dwelling-A limit, plus
10% of any extended replacement limit.
FAIR Plan's Oversight: The FAIR Plan often fails to inform insureds that they can draw from both the Dwelling-A and extended replacement limits.
Partial Losses: For partial losses, where you won't use your entire Dwelling-A limit for repairs, using these payments for FRV may be beneficial.
FRV Limit Example:
Example 1: $0 FRV stated limit, $1 million Dwelling-A coverage, $100,000 extended replacement coverage = $110,000 full FRV limit.
Example 2: $100,000 FRV stated limit, $1 million Dwelling-A coverage, $100,000 extended replacement coverage = $210,000 full FRV limit.
Monthly FRV Benefit:
Your monthly FRV benefit is limited to the lesser of:
The actual FRV, or
Your full limit (as described above) divided by 12.
Example: With a $110,000 limit, your maximum monthly benefit is $9,166.66.
FAIR Plan FRV "Cheats" to Watch Out For:
Pre-Loss vs. Current FRV:
FAIR Plan's Position: FRV is measured in the period before the loss.
The Correct Measure: The correct measure is the FRV now, which is likely much higher.
Action: Tell your adjuster, in writing, that you believe the correct measure is now, not before the fire.
Zillow Pricing:
FAIR Plan's Reliance: The FAIR Plan relies on Zillow pricing, despite having no contract with Zillow and lacking understanding of its algorithm.
The Problem: Zillow rental pricing is often low.
Action: Provide the FAIR Plan with comparable rental listings to support a higher FRV.
Furniture Rental Pricing:
FAIR Plan's Approach: If you have personal property coverage, the FAIR Plan will add the cost of furniture rental to the FRV number, using full-year furniture rental pricing.
The Problem: The FAIR Plan is unlikely to provide a full year of FRV coverage, and full-year pricing is considerably lower than monthly pricing at companies like CORT Furniture Rentals.
Action: Ask the FAIR Plan to explain how they determined the furniture rental pricing. If they use the lower year-long rental number, ask if they are committing to paying your FRV for the full year (in writing).
Premature FRV Cut-Off:
The Risk: "Still-standing" insureds are likely to have their FRV cut off after a few months.
FAIR Plan's Logic: The FAIR Plan may believe your homes are simply "dirty," not damaged.
Action: Push back, in writing!
Share guidance from public authorities about drinking water and other toxic conditions.
Remind the FAIR Plan if you have young children, are elderly, or have health issues.
If your home is in an area with federal government scraping due to dangerous heavy metals, remind the FAIR Plan.
Provide a good hygienist's report showing your home is broken and requires remediation and repairs.
Conclusion:
Navigating the FAIR Plan's FRV coverage can be challenging. By understanding your rights and being aware of these potential "cheats," you can maximize your benefits and ensure you have adequate housing while your home is being repaired.
Download our comprehensive checklist for maximizing your FAIR Plan Fair Rental Value (FRV) benefits. Don't leave money on the table!
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