Updated August 16, 2026
Yes, and in fire-exposed parts of Los Angeles County it is increasingly the only way a building is insured at all. The FAIR Plan is California's insurer of last resort, and since the Palisades and Eaton fires it has been carrying a much larger share of the habitational market. The relevant change for apartment owners is that the FAIR Plan's Commercial High Value program, effective July 26, 2025, raised commercial limits to $20 million per building and $100 million per location — up from an effective cap around $8.4 million per location — as a three-year pilot running through July 2028. That expansion is what made FAIR Plan coverage workable for mid-size and larger apartment buildings. A building on the FAIR Plan sells; what changes is the buyer's expense underwriting and, occasionally, their lender's requirements.
It is a basic-peril policy, not a full commercial package. FAIR Plan coverage centers on fire and related perils. It does not deliver the breadth of a standard commercial property policy.
It is not liability coverage. Owners typically pair it with a separate difference-in-conditions policy to fill the gaps — liability, water damage, theft, and other perils a lender or a prudent owner expects to see covered.
It is a last-resort market, priced accordingly. Premiums generally run materially above what an admitted carrier would have charged for the same building before the market tightened.
Habitational buildings of five or more units are inside the commercial program. That is the category most LA apartment buildings fall into.
The buyer's question is not "is it insured." It is "what will insurance cost me, and can I finance it."
They re-underwrite the premium at their own cost, not yours. Insurance is one of the largest and fastest-moving line items on an LA operating statement. A buyer will get their own quote, and if their quote is higher than your current premium, the difference flows straight through NOI into value at the cap rate.
They check whether the coverage satisfies their lender. Agency and bank lenders have specific requirements — replacement cost basis, minimum limits, sometimes named perils they require covered. A FAIR Plan policy paired with an appropriate difference-in-conditions policy usually satisfies this, but the structure has to be assembled, not assumed.
They look at the loss history. Prior claims, particularly fire or water, affect both what the buyer can obtain and what they pay.
The failure mode on these deals is late discovery. A buyer who learns in week four of escrow that the insurance stack costs $40,000 more than the seller's trailing statement showed will retrade, and they will be right to.
Get a current quote for a new owner, not just your renewal. Your premium reflects your loss history and your carrier relationship. What matters to the price is what a buyer will pay, which is a different number. Having that number in hand — and disclosing it — removes the single most common late-escrow surprise on LA buildings right now.
Document the coverage structure clearly. FAIR Plan policy, difference-in-conditions policy, limits, deductibles, exclusions, and loss runs. Buyers and their lenders will want all of it.
Fix what drives the premium if it is cheap to fix. Brush clearance, roof condition, updated electrical, and documented fire-safety systems are underwriting inputs. Some of them are inexpensive relative to what they move.
Do not present a stale insurance number in the offering package. Using last year's premium on a trailing operating statement in this market is the fastest way to lose credibility on every other number in the file.
Insurance cost has become a real, permanent part of LA multifamily underwriting rather than a rounding error, and buildings in higher-hazard areas carry a structurally higher expense load than they did five years ago. That is priced into the market now — it is not a discount a seller can argue away with a better story. What a seller can control is whether the number is known, current, and disclosed, or whether it arrives as a surprise that costs a second round of negotiation.
FAIR Plan coverage is not a barrier to selling. Unknown insurance cost is. Get a buyer-perspective quote before you list, assemble the full coverage structure including the difference-in-conditions layer, gather your loss runs, and put the real number in the offering package. In the current Los Angeles market, that single piece of preparation prevents more retrades than any other item on the diligence list.
Will a lender finance a building that only has FAIR Plan coverage?
Usually the FAIR Plan alone will not satisfy a commercial lender, because it does not cover the full range of perils and liability they require. The standard solution is a FAIR Plan policy plus a difference-in-conditions policy that fills the gaps. That combination is common in LA and generally acceptable, but it needs to be in place and documented before the loan closes.
Does the buyer take over my FAIR Plan policy?
No. Insurance does not transfer with the building. The buyer obtains their own coverage, which is exactly why the buyer's quote — not your premium — is the number that affects your price.
Are FAIR Plan limits enough for a larger apartment building?
Since the Commercial High Value program took effect in July 2025, limits run up to $20 million per building and $100 million per location, which covers most LA apartment buildings. That program is authorized as a pilot through July 2028, so anyone underwriting a long hold should treat the current structure as the present state rather than a permanent one.
Michael Sterman is Senior Managing Director Investments at Marcus & Millichap.
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