Glossary

Residual market

The state-created plans and pools that cover property owners the private market declines, as opposed to coverage insurers sell by choice.

Also called: residual markets, shared market, involuntary market, state-backed market

The residual market is the safety net under the regular property insurance market. Insurers in the voluntary market choose which homes to write. The homes they leave out, because of location, condition or loss history, go to the residual market: FAIR plan pools, beach and windstorm plans along the coast, and state-created insurers such as Florida's Citizens.

Residual market plans are meant to be a last stop, not a competitor. They generally require that you were declined, or can only find coverage at a much higher price, in the private market. Their rates are supposed to be adequate rather than cheap, and the coverage is often narrower than a standard HO-3. When a plan's reserves fall short after a catastrophe, an assessment spreads the shortfall across insurers and sometimes policyholders.

The size of the residual market is a gauge of stress. When private insurers cut back in an area, plan policy counts climb, as they did in several coastal and wildfire states in recent years. States then try to move policies back to private carriers through depopulation programs and takeout offers.

Read how coastal wind pools work for one slice of this market.

Last reviewed October 10, 2026

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Related terms

FAIR plan A state pool, funded by the insurers doing business there, that sells basic property coverage to owners who cannot find it in the regular market. Insurer of last resort A state-created or state-sponsored insurer that sells coverage to property owners who cannot get a policy from a private company. Depopulation A state program that moves policies out of a state-backed insurer and into private companies, shrinking the plan's exposure to the next catastrophe. Assessment An extra charge raised after a state-backed insurer or guaranty fund runs short of money, collected from insurers and sometimes passed on to policyholders. Takeout policy The private-market policy offered to a state-backed insurer's customer when a company takes over a block of that plan's policies. Surplus lines insurer An insurer not licensed in a state that may write risks the standard market declines, with freer rates and forms and usually no guaranty fund backing.

Related guides

California's home insurance crisis Why California homeowners lost coverage, how the FAIR Plan became a major insurer, and what to do if you are dropped. Facts as of October 2026. California's Sustainable Insurance Strategy What the Sustainable Insurance Strategy changes in California: wildfire models, reinsurance costs in rates, the 85% writing commitment and what you can expect. Depopulation and takeout offers from state insurers of last resort How Citizens-style plans move policies to private insurers, what a takeout letter means, the Florida 20% rule, and how to decide whether to accept or opt out. Insuring a coastal home: wind, flood and where to find coverage Coastal owners often assemble coverage from several sources: a homeowners policy, a flood policy and sometimes a state wind pool. How the pieces fit and cost. Beach and windstorm pools along the coast: how they work Wind pools in Texas, Alabama, Mississippi and the Carolinas cover coastal wind and hail when private insurers will not. Eligibility, limits and tradeoffs. Difference in conditions policies to pair with a FAIR plan A difference in conditions (DIC) policy adds the water, theft and liability coverage a FAIR plan leaves out. How the pairing works and where it can fail.

Related insurers

California FAIR Plan California's insurer of last resort, a pool of all licensed property insurers selling basic fire policies; 696,562 policies in force in June 2026. Louisiana Citizens Property Insurance Corporation Louisiana's nonprofit insurer of last resort, created in 2003 to run the state's FAIR and Coastal plans, with rates set by law above the private market's. NC Insurance Underwriting Association (Coastal Property Insurance Pool) North Carolina's market of last resort for the Outer Banks and 18 coastal counties, writing homeowners, dwelling and wind-only policies up to $1 million.

Related tools

Home insurance rules by state Pick a state, or two side by side, to see its market, insurer of last resort, deductible and claim rules, and regulator contacts.