Minnesota FAIR Plan Alternative

The Minnesota Fair Plan was authorized by the state legislature in order to provide homeowners insurance coverage for owners and tenants of private homes, small business buildings, and farmer and co-op owners that cannot obtain coverage in the private market usually due to filing too many claims or living in areas deemed high risk.

Like many other state FAIR Plans, the purpose of the Minnesota FAIR Plan is to also encourage home owners to improve their properties so that they can return to the private market. The FAIR Plan rates are typically not competitive with private insurance rates and the policy forms are usually very limited which often leads to an undesirable claims experience.

The inland areas of Minnesota have a fairly docile history of natural disasters. There is very little, if any, exposure to hurricane activity, tidal waves or seismic activity. There is however, a history of severe damage from tornadoes and flood activity in other parts of the state which cause thousands of home insurance claims a year. Since Minnesota lies along the north edge of Tornado Alley, that area of the state is at high risk of severe tornado damage every year from March through November. According to the Minnesota Department of Resources, there have been over 1,721 tornadoes in the area from 1950 to 2012 which averages out to 27 per year with the greatest amount of 113 occurring in 2010.

Because of frequent high losses and large scale claim events, Minnesota’s homeowner insurance rates average $1088 per year which is $136 higher than the national average of $952. The state witnessed about an 8% increase in premium for 2015 over 2014 and the outlook is for more increases and cancellations over the next several years to compensate for the higher risk. This will likely cause in increase in interest in the Minnesota FAIR Plan.

As with all FAIR Plans, consumers are urged to try to find coverage in the private market and we can help you find an agent that can help you find alternatives to the FAIR Plan.