California Will Make Your Insurer Offer 50% Extra Rebuild Coverage. Starting 2028. The Bigger Gap Is the Number Underneath.

If you own a home in California, your insurer will soon have to offer you coverage that pays up to 150% of your dwelling limit. It will have to put the price next to the offer. And if you say no, your refusal goes on your declarations page.

Good law. Two problems.

It doesn’t start when the press release says it does. And it stacks on top of a number that’s usually wrong.

Governor Newsom signed SB 876, the “Disaster Recovery Reform Act,” on September 27. It came straight out of the Los Angeles fires. It makes insurers file disaster claim plans and name one point of contact on each disaster claim, with a written status report within 15 days whenever that contact changes. Penalties double for claim violations during a declared emergency. And every eligible policy written or renewed has to come with an offer of extended replacement cost of at least 50%. Extended replacement cost is the cushion that pays past your dwelling limit when rebuilding costs more than the policy says.

The Department of Insurance’s release ends with one line: “SB 876 takes effect January 1, 2027.”

Read the bill. The new section that requires the 50% offer says it “shall become operative on January 1, 2028.” So do the 15-day status report, the extra living-expense offer and the rebuild-estimate rule. Two days later the department’s own roundup said the law rolls out “in phases,” with “additional provisions” in 2028. Translation: the part you’d actually see on a renewal is about 15 months away.

Now the bigger catch.

A cushion is a percentage. A percentage of a bad number is still a bad number.

Law professor Kenneth Klein pulled Department of Insurance data on 74,070 California fire claims from 2018 to 2023. The rebuild estimate insurers typically use to set your dwelling limit came in below the real loss 75% to 95% of the time. The average miss was more than 30%. Roughly 90% of those policies already carried extended or guaranteed replacement cost, and 150% was the most common level. Most homes destroyed in catastrophes still came up short.

The Los Angeles numbers are worse. In a United Policyholders survey of 675 households a year after the fires, 69% of total-loss owners said they lacked enough insurance to rebuild. Only 7% said they had enough. The underinsured Palisades households came up 46% short on average.

Run it on a house. Say your dwelling limit is $600,000 and the true rebuild cost is $860,000, a 30% miss. A 25% cushion gets you to $750,000. You’re $110,000 short. The 50% cushion the law will require gets you to $900,000, but only because it’s papering over a bad estimate. If the estimate were right, you’d have needed far less cushion.

Your call on the cushion. Not on the base number. Fix that first.

Pull your declarations page this week. Find two things: your dwelling limit, Coverage A, and any extended replacement cost percentage.

Divide that limit by your home’s square footage. Then call a local general contractor and ask what it costs per square foot to build a house like yours in your ZIP today. If your number is well under theirs, ask your insurer to redo the estimate and quote a higher limit.

Then ask for the price of 50% extended replacement cost now. You don’t need to wait until 2028 to buy it. United Policyholders’ Amy Bach has testified that adding extended coverage is typically cheaper than raising the dwelling limit.

Last, check your additional living expense limit. That’s the money for rent and hotels while the house is rebuilt. If it’s a flat dollar cap, ask what 50% more costs.

Running the mortgage side of a rebuild too? Our mortgage calculator and the mortgages hub cover it. The law will hand you a better offer in 2028. Find out whether your house was priced right before you need either one.

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