California Law Requires Higher Home Insurance Coverage Following Underinsurance Findings
What happened
A study by Kenneth Klein, a law professor at California Western School of Law, found that 71.3% of owner-occupied California homes destroyed in fire between 2018 and 2023 were underinsured, averaging about 19% short. This research pointed to insurers’ own rebuild estimates as the primary cause of underinsurance. In response, Governor Gavin Newsom signed SB 876, which requires home insurers to offer extended replacement cost coverage of at least 50% above the dwelling limit when writing a policy.
Why it matters
The findings highlighted that initial point-of-sale reconstruction estimates often fell below the final incurred loss in 75% to 95% of cases, with an average miss exceeding 30%. The new state law, SB 876, directly addresses this gap by mandating higher coverage limits for home insurance policies across California.
Who's involved
- Kenneth KleinLaw professor who conducted the study on underinsurance
- California Western School of LawLaw school where Kenneth Klein is employed
- Gavin NewsomGovernor of California who signed the new insurance law
Who could feel it
Possible knock-on effectsThese are possibilities Brind reasoned out, not predictions, and not advice. Most are not stated in any report.
- Los Angeles CountySpeculative
Los Angeles County could see increased claims volume and higher costs for insurers.
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The entities involved
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California Western School of Law
American law school
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