Disaster recovery involves more than restoring property to its pre-loss condition. Policyholders may also need to navigate coverage limits, temporary housing costs, and changes in who handles their claim.
California’s newly signed Senate Bill 876, the Disaster Recovery Reform Act, addresses these familiar challenges. Governor Gavin Newsom signed the bill on September 27, 2026. The law takes effect in 2027, but its reforms become operative on January 1, 2028. The Department of Insurance’s September 28, 2026, announcement explains the law’s background and consumer-protection goals.
Protection Against Underinsurance
When issuing or renewing a policy, SB 876 requires insurers to offer eligible homeowners extended replacement cost coverage of at least 50% above the primary dwelling limit. The offer must include an additional premium, and insurers must document any rejection.
For example, a homeowner with a $500,000 dwelling limit who buys a 50% extension could receive an additional $250,000 for covered rebuilding expenses, subject to policy terms. This coverage can help when rebuilding costs exceed expectations. Homeowners should review the offer carefully: existing coverage does not increase automatically.
Better Information About Rebuilding Costs
The law eliminates exemptions from the requirement that insurers offering replacement cost coverage provide rebuilding estimates at renewal every other year. It also applies this requirement to qualifying FAIR Plan policies when replacement cost coverage is available and the offered or provided limit falls below the maximum combined limit.
A rebuilding estimate gives homeowners a starting point for discussing coverage limits. Reviewing the property’s square footage, contents, and other features can reveal assumptions that warrant closer scrutiny. The estimate is most useful when it accurately reflects the insured property.
Additional Support While Displaced
For homeowners’ policies with dollar limits on additional living expenses, SB 876 requires insurers to offer at least 50% more coverage above the underlying limit and specify the premium charge.
The law also explicitly identifies reimbursable expenses homeowners may overlook while displaced, including temporary housing, furniture rental, food, transportation, storage, and pet boarding. These must be reasonable costs above pre-loss spending, incurred to maintain a comparable standard of living while the primary dwelling is uninhabitable.
SB 876: Key Takeaways
SB 876 gives homeowners a reason to review their coverage before the next disaster. Ask your insurer about extended replacement cost coverage, review your living expense limits, and discuss the rebuilding estimate used to set your dwelling limit.
If you already have a claim, keep correspondence, expense records, and a timeline of claim decisions. Understanding your coverage and documenting the insurer’s handling of the claim can help you pursue the benefits available under your policy.
