Last Friday in California, Governor Arnold Schwarzenegger signed AB2022, which establishes new guidelines for homeowners insurance disclosures, into law. It will go into effect on July 1st of next year.
Specifically, the new law changes the mandatory language of the California Residential Property Insurance Disclosure, in order to make the description of types of homeowners insurance easier for consumers to understand at the time of purchase. It will also revise and clarify the California Residential Property Insurance Bill of Rights.
Under the old law, residential property insurance policies do not become effective unless a copy of the California Residential Property Insurance Disclosure, which defines types of coverage (such as actual cash value vs. guaranteed replacement cost), is provided to the named insured. As well, existing law also required that the Disclosure be accompanied by the California Residential Property Insurance Bill of Rights.
Steve Poizner, the California Insurance Commissioner, is all for the changes, believing that misunderstandings about insurance coverage have resulted in inadequately covered homeowners, especially after recent major wildfires. “Existing disclosures are nearly two decades old, and reflect a market that has changed dramatically,” he said. “Consumers have many difficult choices to make when buying homeowners insurance, but they have to know what those choices are, and have reliable information to base their decision on. AB 2022 and [the] new regulations will give consumers greater confidence on both of those fronts.”
The bill that goes into effect next July specifies the language that must be provided to anyone shopping for homeowners insurance policies, and provides a checklist of the different variables in coverage. In addition to the new disclosure, the Department of Insurance is also creating new regulations to help calculate more accurate estimates of what it might cost to completely rebuild a home. Such estimates are currently not subject to any regulation.
Poizner added, “When I took office, I promised I would address the problem of underinsurance, and I am going to fulfill that promise.”