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California requires insurers to offer more extended replacement coverage
California’s SB 876, signed Sept. 27, mandates extended replacement cost coverage of at least 50% above the dwelling limit, after state claim data showed many destroyed homes were still underinsured.
California has moved to address home insurance underinsurance in wildfire disasters, with Gov. Gavin Newsom signing SB 876 on Sept. 27, Insurance Business reports. The law requires home insurers to offer extended replacement cost coverage of at least 50% above the dwelling limit when they write a policy.
The state is also grappling with why coverage often still falls short, Insurance Business reports. The outlet notes that California’s claims files indicate many destroyed homes already carried some extended coverage, but came up short because the rebuild estimate used to set that coverage was too low.
Insurance Business cites research by Kenneth Klein, a law professor at California Western School of Law, who studied underinsurance after a 2003 wildfire destroyed his own home. Through public records requests, Klein obtained Department of Insurance data on 74,070 fire claims on owner-occupied California homes from 2018 to 2023, and found that among homes destroyed, 71.3% were underinsured by about 19.0% on average, according to his analysis published in the Lewis & Clark Law Review.