Master Key Numbers - MEMORIZE THESE!
$1.5M
FAIR Plan max value
60
Days - FAIR binder / Free cancel period
5%
Max FAIR surcharge
3
Rejections for surplus lines
30-120
Days - Cancel notice window
10
Days - Non-payment cancel
3 Yrs
Block cancel phase-out max
30
Days - Rates AFTER / Forms BEFORE
$10K
Special risk threshold
30
Days - NFIP waiting period
FAIR Plan (NJ Insurance Underwriting Association)
What It Is
- - Insurance for those rejected by regular market
- - Focus on urban areas
- - Mandatory participation by all NJ property insurers
- - Run by NJ Insurance Underwriting Association
Key Numbers
- - $1,500,000 maximum property value
- - 60 days binder validity
- - 5% maximum surcharge
- - Surcharge paid semiannually
Key Requirement:
Must try regular market FIRST and be rejected before applying to FAIR Plan.
Cancellation & Nonrenewal
The 60-Day Rule
- - First 60 days: Insurer can cancel for ANY reason
- - After 60 days: Need specific reason to cancel
Notice Requirements
- - Standard cancel/nonrenewal: 30-120 days notice
- - Non-payment: Only 10 days notice
Valid Reasons to Cancel (After 60 Days)
Block Cancellation:
Requires plan filing 30 days before sending notices. Commissioner can extend phase-out up to 3 YEARS.
Surplus Lines Insurance
What It Is
- - Insurance from nonadmitted (unlicensed) insurers
- - For unusual or hard-to-place risks
- - Only licensed Surplus Lines Brokers can place it
- - NO guaranty fund protection!
Diligent Effort
- - Must be rejected by 3 authorized insurers
- - Each must be authorized for that type of coverage
- - Must have good faith belief they might consider it
Exportable List Shortcut:
If the coverage type is on the Commissioner's Exportable List, you can skip the 3 rejections. List is compiled annually.
Coastal Properties & Hurricane Risk
The Challenges
- - NJ has 127 miles of coastline
- - Many insurers won't cover coastal properties
- - Hurricane deductibles are often percentage-based
- - Wind damage vs. flood damage disputes
NFIP (Flood Insurance)
- - Standard homeowners does NOT cover flood
- - NFIP max: $250K building, $100K contents
- - 30-day waiting period
- - No wait for mortgage closing
Critical Distinction:
Wind damage = covered by homeowners. Flood damage = NOT covered (need separate NFIP policy).
Commercial Insurance Deregulation
The 30-Day Rules
- - RATES: File 30 days AFTER effective
- - FORMS: File 30 days BEFORE effective
- - All filings are public information
Rate Standards
- - Cannot be EXCESSIVE (too high)
- - Cannot be INADEQUATE (too low)
- - Cannot be UNFAIRLY DISCRIMINATORY
Special Risks (Exempt from Filing)
- - Premium over $10,000 (except med mal)
- - Unusual, high hazard, difficult to place
- - Inland Marine (always special)
- - Fidelity, Surety, Forgery Bonds (always special)
Violations
- - Must hold hearing first
- - Can suspend/revoke license
- - Penalty: $25-$500 per willful violation
Top 10 Exam Traps - Don't Fall For These!
1. FAIR Plan isn't first choice
Must try regular market first and be rejected
2. 60 days = Two different things
FAIR binder validity AND free cancel period
3. 3 rejections for surplus lines
Not 2 or 5 - exactly 3 (unless on Exportable List)
4. No guaranty fund for surplus lines
Consumer has no state protection if insurer fails
5. Flood NOT covered by homeowners
Need separate NFIP policy - always!
6. NFIP 30-day waiting period
Can't buy when hurricane coming (except mortgage)
7. Rates AFTER, Forms BEFORE
Both 30 days but opposite directions!
8. 10 days ONLY for non-payment
All other cancels need 30+ days notice
9. Med mal NOT a special risk
Excluded from $10K special risk exemption
10. 120 is MAX, not minimum
Cancel notice: 30-120 days - too early is invalid!
Quick Comparison: Getting Hard-to-Place Coverage
| Option | When to Use | Key Requirement | Protection |
|---|---|---|---|
| FAIR Plan | Urban property, rejected by regular market | Max $1.5M value | Has guaranty fund |
| Surplus Lines | Unusual risks, specialty coverage | 3 rejections OR Exportable List | NO guaranty fund |
| NFIP | Flood coverage (always needed separately) | 30-day wait; $250K/$100K limits | Federal program |
Chapter 5 in One Sentence Each
Part 1: FAIR Plan
Insurance backup for those rejected by regular market (max $1.5M, 60-day binder, 5% surcharge).
Part 2: Cancellation
Free cancel first 60 days; after that need reason. 30-120 days notice (10 for non-payment).
Part 3: Surplus Lines
Coverage from unlicensed insurers - need 3 rejections first (no guaranty fund protection).
Part 4: Coastal
Hurricane risk areas - wind covered by homeowners, flood needs NFIP (30-day wait).
Part 5: Deregulation
Rates file 30 days AFTER effective; forms file 30 days BEFORE. $10K+ = special risk.
Overall Theme
NJ ensures coverage is available (FAIR/NFIP) while protecting consumers (cancel rules) and allowing competition (deregulation).