Home insurance companies in California will soon be required to make more detailed disclosures to consumers. The new law signed by Gov. Arnold Schwarzenegger Sept. 30 is designed to give homeowners a better idea of what they need to be adequately insured in case of a disaster.
The law, which becomes effective July 1, 2011, requires home insurers to update 20-year-old disclosure forms to make them easier to understand. It mandates specific language and a checklist of major insurance policy variables to make homeowners understand if their homes are underinsured before a catastrophic event occurs.
California Insurance Commissioner Steve Poizner praised the new law in a press statement, adding that his department will draft rules to help provide more accurate and reliable estimates for what it would cost to rebuild a destroyed home. Often consumers underestimate how much home insurance coverage they need in case of a disaster.
"Existing disclosures are nearly two decades old, and reflect a market that has changed dramatically," Poizner said in the press statement. "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."
The law was supported by the Property Casualty Insurers Association of America.