FAIR plan gave 97-year-old fire victim just $38K — so her son paid $300K to repair home. Why ‘bare’ insurance is a risk most homeowners can’t afford

After the fire, Norma Nahigian’s house survived structurally, but the interior was contaminated with toxic smoke and debris. Her policy through the California FAIR Plan paid only about $38,000 toward remediation.

Ultimately, her son spent $300,000 of his own money to make his mother’s home safe again, and the family is now considering legal action over the limited payout.

“I don't want to worry about money at age 97,” Nahigian told ABC 7. “I really don't. Working hard all my life and doing what I've done. (1)”

Her situation highlights a growing risk across wildfire-prone regions: Many homeowners now rely on stripped-down insurance policies that may leave major financial gaps.

Why more homeowners are turning to FAIR Plans

Established 50 years ago, the California FAIR Plan is designed as an insurer of last resort. It’s a safety net for homeowners who can’t obtain traditional coverage.

It’s run by a consortium of insurance companies and provides basic fire protection rather than comprehensive homeowners insurance (2).

In recent years, the program has expanded as insurers pull back from high-risk wildfire areas, leaving some homeowners with few alternatives (3).

According to the San Francisco Chronicle, FAIR Plan policies can cost upwards of $3,200 — which is what most Palisades residents pay (4).

"I just want the public to be aware of what Palisades people go through,” Nahigian told ABC 7. “They don't all have tons of money in their pockets. We must be repaid for what we have gone through and what we have paid all our lives to insurance."

FAIR Plan policies often focus on fire-related damage, meaning homeowners may need separate policies to cover risks such as liability or water damage.

That structure can create a dangerous misunderstanding: homeowners may assume they have full protection when they actually have only limited coverage.

The hidden gaps in ‘bare’ insurance

Nahigian’s experience illustrates several common insurance gaps that many homeowners may not fully understand.

One key distinction is replacement cost versus actual cash value. Replacement cost coverage pays to rebuild with similar materials at current prices, while actual cash value deducts depreciation. Policies with actual cash value can leave homeowners paying much more out of pocket.

Another difference is dwelling coverage versus remediation costs. Dwelling coverage typically focuses on repairing or rebuilding the structure itself, while things like smoke cleanup, debris removal and environmental testing may fall under separate limits or exclusions. Nahigian was dealing with remediation costs.

Finally, policy limits don’t always match the cost of rebuilding.

In California, rebuilding generally costs $375 to $600 per square foot, depending on materials and labor (5) — but that rises to $400 to $700 per square foot in high-cost areas like Pacific Palisades (6).

After major disasters, costs climb even higher due to contractor shortages and materials inflation.

That means a 2,500-square-foot home could cost well over $1 million to rebuild — far more than many policies cover. Those gaps can be financially devastating for anyone, but especially for seniors living on fixed incomes.

How underinsurance happens

Many homeowners choose lower limits to keep premiums affordable. Others rely on outdated estimates that don’t reflect current construction costs.

It’s also easy to confuse market value with rebuilding cost. Insurance covers the structure, not the land, so the amount needed to rebuild can differ dramatically from a home’s purchase price.

Even homeowners who believe they're fully insured can be caught off guard.