Key Takeaways
- The Kentucky FAIR Plan provides property insurance when standard market coverage is unavailable
- Applicants must demonstrate inability to obtain coverage through normal insurance channels
- Coverage is basic property protection, not as comprehensive as standard HO-3
- FAIR Plan policies are typically written on Actual Cash Value basis
- All admitted property insurers in Kentucky must participate in the FAIR Plan
Kentucky FAIR Plan
Overview
The Kentucky FAIR Plan Reinsurance Association (Fair Access to Insurance Requirements) provides basic property insurance coverage to property owners in the Commonwealth who have been unable to obtain coverage through the voluntary insurance market.
Legislative Authority
The Kentucky FAIR Plan operates under:
- Kentucky Revised Statutes (KRS) 304.35
- Kentucky Department of Insurance oversight
- Administration by member insurance companies
- Serves as market of last resort
Purpose and Mission
The Kentucky FAIR Plan exists to:
- Ensure property insurance availability in Kentucky
- Provide coverage for high-risk properties
- Protect property owners from going uninsured
- Stabilize insurance markets in difficult areas
- Serve as a bridge until standard market coverage available
Eligibility Requirements
Primary Requirement
To qualify for the Kentucky FAIR Plan, applicants must:
-
Demonstrate Market Rejection
- Unable to obtain coverage through standard insurance market
- Contact licensed Kentucky insurance producer
- Document efforts to obtain voluntary market coverage
-
Meet Underwriting Standards
- Property must meet basic safety requirements
- Cannot be in foreclosure
- No outstanding tax liens
- Comply with local building codes
-
Apply Through Licensed Producer
- Must use licensed Kentucky insurance agent
- Cannot apply directly to FAIR Plan
- Producer submits application on behalf of applicant
Reasons for Standard Market Declination
Common reasons Kentucky properties may be declined:
| Reason | Description |
|---|---|
| High-Risk Location | Flood-prone or crime-prone areas |
| Property Condition | Age, maintenance issues, outdated systems |
| Claims History | Multiple prior claims |
| Construction Type | Non-standard building materials |
| Vacancy | Extended periods of vacancy |
| Business Use | Home-based business activities |
Coverage Available
Policy Types Offered
| Policy Type | Description |
|---|---|
| Dwelling Fire (DP) | Basic fire coverage for residences |
| Homeowners (HO-2) | Broad form named perils coverage |
| HO-4 Renters | Renters insurance coverage |
| HO-6 Condo | Condominium unit owner coverage |
| HO-8 Modified | Coverage for older homes |
| Commercial Fire | Basic commercial property coverage |
Important Coverage Limitations
The Kentucky FAIR Plan does NOT offer HO-3 policies.
| Standard HO-3 | Kentucky FAIR Plan |
|---|---|
| Open perils dwelling coverage | Named perils coverage |
| Replacement cost standard | Actual Cash Value standard |
| Comprehensive protection | Basic protection only |
| Broad coverage options | Limited coverage options |
Covered Perils Under FAIR Plan
Named perils coverage typically includes:
- Fire and lightning
- Windstorm and hail
- Explosion
- Smoke damage
- Riot or civil commotion
- Vehicles and aircraft
- Vandalism and malicious mischief
Perils NOT Covered
Standard exclusions include:
- Flood (requires separate NFIP policy)
- Earthquake (requires separate coverage)
- Ordinance or law
- Water backup
- Wear and tear
- Intentional loss
- Nuclear hazard
Policy Features
Valuation
- Actual Cash Value (ACV) is standard
- Depreciation applied to claims
- Replacement cost endorsement may be available
- Limits may be lower than standard market
Deductibles
- Standard deductibles apply
- May be higher than standard market
- Percentage deductibles for wind/hail
- Higher deductibles may reduce premiums
Premium Costs
FAIR Plan premiums typically:
- Higher than standard market
- Reflect higher risk profile
- Subject to Kentucky DOI approval
- May vary by property type and location
Funding and Operation
Member Company Participation
| Requirement | Description |
|---|---|
| Mandatory Participation | All admitted Kentucky property insurers |
| Proportional Sharing | Based on market share |
| Annual Assessment | Contribution based on premium volume |
| Loss Sharing | Proportional sharing of FAIR Plan losses |
Administration
The Kentucky FAIR Plan is administered by:
- Board of directors from member insurers
- Professional management staff
- Servicing carrier for policy administration
- Subject to Kentucky DOI oversight
Application Process
Steps to Obtain FAIR Plan Coverage
-
Contact Licensed Agent
- Find licensed Kentucky insurance producer
- Explain insurance needs
- Agent documents market search efforts
-
Complete Application
- Provide property information
- Disclose prior claims history
- Include property photos
- Submit through FAIR Plan system
-
Property Evaluation
- FAIR Plan may require inspection
- Evaluate property condition
- Identify any required improvements
- Determine insurability
-
Underwriting Review
- Application reviewed for eligibility
- Coverage terms determined
- Premium calculated
- Policy issued or declined
-
Policy Issuance
- Coverage effective upon approval
- Premium payment required
- Policy documents provided
- Annual renewal process
Contact Information
Kentucky FAIR Plan
- Address: 10605 Shelbyville Road, Suite 102, Louisville, KY 40223
- Phone: 888-222-7702 or 502-425-9998
- Website: kyinsplans.org
Exam Tip: Remember that the Kentucky FAIR Plan is the insurer of last resort - applicants must first attempt to obtain coverage in the standard market. FAIR Plan coverage is basic (named perils, ACV) and does not include HO-3 comprehensive coverage.
What is the purpose of the Kentucky FAIR Plan?
What type of homeowners policy does the Kentucky FAIR Plan offer?
What valuation method is typically used for Kentucky FAIR Plan policies?