09/29/2026
New California law will change how you sign up for home insurance.
A newly signed law will give California homeowners more ways to make sure they
can recover financially after disaster.
Starting next year, all home insurers in California must offer at least 50% extended
replacement cost coverage to clients under a law Gov. Gavin Newsom announced
Sunday he had signed.
In almost all cases, home insurance policies — including those marketed as
replacement cost coverage — will only replace a policyholder’s home and
belongings up to a set coverage limit. Extended replacement cost coverage allows a
policyholder to go beyond that limit if they need to. And oftentimes, they need to.
A Pulitzer Prize-winning Chronicle investigation published last year found many
major insurance companies recommend policy limits to homeowners using an
algorithm susceptible to mistakes that leave wildfire survivors without enough
money to rebuild when their homes burn down — a phenomenon known as
underinsurance. The problem is magnified after disasters, when widescale
destruction causes the demand for contractors and materials to surge, raising
prices.
Consumer advocates say extended replacement cost coverage is an important tool
to fight underinsurance by giving policyholders access to additional funds beyond
their coverage limit. Requiring a minimum of 50% extended replacement cost was
one of the proposed solutions during a Board of Equalization hearing last May held
in response to the Chronicle’s investigation.
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“Today we are telling every wildfire survivor who shared their story: We heard you,
and now it’s the law,” Insurance Commissioner Ricardo Lara wrote in a statement
Monday. “No family who has lost everything should have to fight their insurance
company to get the benefits they paid for.”
About 40% of insurance companies in California already offer 50% extended
replacement cost or more, Deputy Commissioner Tony Cignarale testified before
the state Senate Insurance Committee.
Across California, 87% of homeowners insurance policies have extended
replacement cost coverage; a third have 50% or more, according to the California
Department of Insurance.
Ken Klein, a law professor at California Western School of Law, has researched the
frequency of underinsurance and was one of the experts to testify before the Board
of Equalization. His most recent research found that homes impacted by fires were
even more likely to have extended replacement cost — in an analysis of 74,000
California fire claims between 2018 and 2023, Klein found 89% had some kind of
extended replacement cost coverage, and of those,about 42% had 50% extended
replacement cost coverage or more.
Klein said the data suggests that homeowners are willing to pay more if it means
having more coverage, even as the ongoing insurance crisis caused premiums to
spike. When such extended coverage is available, and when insurance brokers and
agents explain its importance, “my research suggests homeowners will buy it. In
droves,” he said.
Homeowners will still have to opt into the coverage, which does come at a cost. But
the added cost of extended replacement cost coverage is typically less than the cost
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of increasing policy limits overall, Amy Bach, executive director of the consumer
advocacy group United Policyholders, testified to the Board of Equalization.
The new law, authored by state Sen. Steve Padilla, D-Chula Vista, will also require
all insurers, including the California FAIR Plan, to give policyholders an estimate
of the cost to rebuild their home.
The insurance industry initially opposed the bill, testifying in committee that
requiring additional coverages would drive up premiums. But by the time it passed
the Assembly, industry groups switched their position to neutral.
Bach told the Chronicle policyholders will typically only dip into extended
replacement cost if their home is completely destroyed, which is rare in the scope
of all insured homes in the state. Therefore, she said, the extended replacement
cost requirement should not have a significant impact on statewide rates.
Alongside the provisions addressing underinsurance, the bill also doubles fines
when insurance companies violate laws that regulate how claims are handled
during a declared emergency, such as a wildfire. It will also require insurers to
directly pay restitution to their policyholders when they’re found to have
committed such violations.
Insurance companies will also have to create disaster recovery plans in advance,
which will help regulators at the California Department of Insurance ensure
companies are prepared to support policyholders and process claims after
disasters, according to Deputy Commissioner Michael Soller.
“It’s all about consumer protection and it’s about making sure people’s needs are
met timely, transparently, fairly and equitable when they suffer catastrophic loss,
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which is why people pay premiums for, in some cases, decades,” Padilla told the
Chronicle after the bill passed the legislature.
More notice before being dropped
On Sunday, Newsom also signed SB 1301, a bill by state Sen. Ben Allen, D-Santa
Monica, which requires insurers to give policyholders 90 days notice, up from 75,
before their policy is nonrenewed. If the insurer determined the policy was being
dropped for a reason the policyholder could fix, such as an outdated roof, it would
require the insurer to give 120 days notice. The bill takes effect at the beginning of
2028.
However, he vetoed two bills that addressed common issues that arose in the
aftermath of the January 2025 Eaton and Palisades fires.
SB 877 and 878, both authored by state Sen. Sasha Pérez, D-Alhambra (Los Angeles
County), would have required insurance companies to pay interest penalties for
delayed payments and to provide policyholders with copies of all estimates created
for their claims.
These bills followed widespread complaints from wildfire survivors alleging their
insurers delayed making decisions and issuing payments. The Los Angeles County
wildfires were the most expensive in global history, with insurers having paid $25.2
billion in claims as of July. The Chronicle’s investigation also documented cases in
which insurers denied or delayed providing estimates to policyholders, despite
instructions from regulators to do so.
In his veto message, Newsom cited recent Department of Insurance reforms that
regulate the way insurance companies write and price policies. He wrote that SB
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Sep 28, 2026
Megan Fan Munce
REPORTER
Megan Fan Munce is a reporter on the climate team covering California’s home insurance crisis. She writes
about rate changes, state policy initiatives, the growth of the California FAIR Plan, and how homeowners are
navigating challenges in the insurance market. Her awards include the 2026 Pulitzer Prize in Explanatory
Reporting for “Burned,” a series that explored how insurance industry practices left many wildfires survivors
unable to rebuild and recover. Munce joined the Chronicle as part of the two-year Hearst Journalism
Fellowship, spending her first year at the Houston Chronicle. She grew up in the Bay Area before attending
Northwestern University’s Medill School of Journalism.
How to reach Megan
Email [email protected] or reach her on Signal at meganmunce.88 to share tips or tell Megan
about your experience with home insurance in California.
877 and 878 “seek to codify portions of unrelated, existing regulations that are
unnecessary at this time.”
Consumer advocates and wildfire survivors lambasted the vetoes. In a statement,
advocacy group Consumer Watchdog said the department’s reforms do not at all
address the issues that SB 877 and 878 sought to solve.
Joy Chen, an Eaton Fire survivor and founder of the group Every Fire Survivor’s
Network, said in a statement the vetoes would leave future fire survivors
vulnerable to the delays that plagued survivors in Altadena and the Pacific
Palisades, setting back their recovery.
“I’m disappointed that, again, California fire survivors will be forced to wait for
accountability and justice as a result of the Governor’s veto,” Pérez said in a
statement.
