The California Department of Insurance has released its 2025 Annual Notice detailing significant laws governing residential property insurance policies. These regulations are especially critical for homeowners and insurers dealing with wildfire-related claims and other declared emergencies. Here’s a straightforward breakdown of what’s new and what to keep in mind.
What Is the 2025 Annual Notice?
The Department of Insurance is required each year to circulate a notice highlighting the most significant laws that affect residential property insurance. Issued on January 9, 2025, by Insurance Commissioner Ricardo Lara, this notice clarifies important claims, coverage, and underwriting regulations—particularly those related to a state of emergency.
Key Laws Affecting Claims and Coverage
• Actual cash value calculation. Under an open policy requiring actual cash value, insurers must pay the cost to repair, rebuild, or replace (minus physical depreciation).
• Replacement cost value calculation. Under an open policy requiring replacement cost, no deduction for physical depreciation is allowed.
• Time limit to collect full replacement cost. Policyholders have at least 12 months to collect replacement costs, extended to 36 months (with possible six-month extensions) following a declared state of emergency.
• Rebuilding in a new location. Insurers cannot reduce or deny replacement cost payments if you rebuild or purchase a home in a new location.
• Additional living expenses (ALE). Coverage must last at least 24 months in a declared state of emergency, with an option to extend to 36 months.
Special Provisions After a State of Emergency
• Payment of contents without inventory. In a total loss, policyholders are entitled to receive an upfront payment of at least 30% of the dwelling coverage (capped at $250,000), without itemizing belongings first.
• Grace period for payments. A 60-day grace period is required for premium payments in areas under a state of emergency.
• Changing claims adjusters. If three or more adjusters are assigned within six months, insurers must designate a primary contact person and update the insured on claim decisions or disputes.
Rating and Underwriting Highlights
• Wildfire risk score disclosure. Insurers must provide and explain any wildfire risk score or classification, give policyholders the right to appeal, and detail potential mitigation steps.
• Adjustment of policy limits at renewal. If a home is under reconstruction, insurers must update coverage limits and adjust premiums accordingly.
• Restrictions on non-renewals. Companies must renew policies for at least two annual renewal periods (24 months) when a total loss is caused by a declared disaster, unless new risks make the property uninsurable.
• Prohibition on non-renewal or cancellation within a fire perimeter. Insurers cannot drop coverage for one year after a state of emergency simply because a wildfire occurred in that area.
Staying Compliant and Protected
• Building code upgrade coverage. Every replacement cost policy must include at least 10% of dwelling coverage for code upgrades, beyond the standard dwelling limit.
• Combining coverages. Policyholders can pool coverage limits for the dwelling and other structures to rebuild if primary dwelling limits are insufficient.
• Copy of policy after a loss. Insurers must supply a full, current copy of your policy within 30 days of request, at no charge.
Final Thoughts
Understanding these updates is essential for both homeowners and insurance professionals, especially in wildfire-prone regions or during other declared emergencies. Reviewing your policy, knowing your rights, and staying on top of new requirements can make a big difference when filing or handling a claim.
To learn more, review the full 2025 Annual Notice on the California Department of Insurance website or contact a qualified insurance professional. By staying informed, you’ll be better prepared to navigate California’s evolving insurance landscape—whether you’re safeguarding your property or processing a claim.