New California law: home insurers must offer 50% extended replacement cost — what homeowners should do now

By Daniel Masarsky, CA Lic. 0D87510 · Published September 28, 2026

Update (September 28, 2026): Gov. Gavin Newsom has signed SB 876, Sen. Steve Padilla’s Disaster Recovery Reform Act, sponsored by Insurance Commissioner Ricardo Lara. The headline change for homeowners: every residential property insurer in California will have to offer at least 50% extended replacement cost coverage when it writes or renews a policy, and give you an estimate of what it would cost to rebuild your home. The goal is to reduce underinsurance, the gap that left many wildfire survivors without enough money to rebuild.

The San Francisco Chronicle reported the signing. SB 876 also appears on the Governor’s September 27, 2026 list of signed bills. Below is what the law does, when it applies, and what you can do before your next renewal.

What extended replacement cost actually does

Most homeowners policies, including ones sold as “replacement cost” coverage, only pay up to the dwelling limit on your declarations page. If rebuilding costs more than that limit, you pay the difference. After a big wildfire, that difference can be large.

Extended replacement cost (ERC) adds a cushion above your dwelling limit. With 50% ERC on a $800,000 dwelling limit, for example, the policy could pay up to $1.2 million to rebuild if the actual cost runs higher. (Illustration only, not a quote.)

According to the California Department of Insurance, as reported by the Chronicle, about 87% of California homeowners policies already have some extended replacement cost, and about a third have 50% or more. The question is whether yours is big enough.

What SB 876 changes

Based on the chaptered bill text on the California Legislature’s website:

• Mandatory 50% ERC offer. A residential property policy can’t be issued or renewed unless you’re offered extended replacement cost of at least 50% above the dwelling limit, with the premium for it shown. This applies to properties eligible for replacement cost coverage.
• Declining becomes a documented decision. If you turn the offer down, the insurer has to record that you declined and say so on your declarations page.
• Rebuild cost estimates, including from the FAIR Plan. The law removes existing exemptions from the requirement to give you a cost-to-rebuild estimate. It also extends that requirement to the California FAIR Plan when replacement cost coverage is available and your limit is below the FAIR Plan maximum.
• Extended living expense options. If your policy has a dollar limit for additional living expenses (ALE), the insurer must offer extended ALE of at least 50% above that limit. For a covered total loss tied to a declared emergency, loss-of-use coverage must last at least 24 months.
• Building code upgrades measured at rebuild time. Building code upgrade coverage will be based on codes in effect when you rebuild, not when the loss happened.
• Claims accountability in disasters. For state-of-emergency claims, insurers must assign a primary point of contact within 30 days. Penalties for unfair claims practices during a declared emergency double (up to $10,000 per act, or $20,000 if willful), and the Commissioner can order restitution paid to policyholders.

Timing: Early news coverage described the new requirements as starting next year. However, the chaptered bill text says most of these new sections take effect January 1, 2028. Treat 2028 as the date the mandatory offer applies to policies. Nothing stops you from asking for higher ERC today if your carrier offers it.

Two related bills: one signed, two vetoed

The Governor also signed SB 1301 (Sen. Ben Allen). Per the Chronicle, it raises the notice insurers must give before a nonrenewal from 75 to 90 days. If the reason is something you can fix, such as an outdated roof, the notice rises to 120 days. The Chronicle reports it takes effect at the start of 2028.

He vetoed SB 877 and SB 878 (Sen. Sasha Renée Pérez), which would have required interest penalties on delayed claim payments and copies of all claim estimates.

What it means for policyholders

• You’ll see the choice clearly. Starting in 2028, ERC won’t be something you only get if you know to ask. It has to be offered with a price attached.
• It still costs money, and it’s opt-in. The law requires the offer, not the purchase. Amy Bach of United Policyholders testified that adding ERC is typically cheaper than raising the dwelling limit overall.
• Rate impact is debated. The industry moved from opposing the bill to neutral. Bach told the Chronicle she doesn’t expect a significant statewide rate effect, since ERC mostly matters after total losses.
• FAIR Plan customers get rebuild estimates too. That’s useful for checking whether your FAIR Plan limit, plus any DIC policy, is realistic. See our California FAIR Plan guide.

Practical steps before your next renewal

1. Find your dwelling limit and ERC percentage on your declarations page. If it says 0%, 10%, or 25%, ask what 50% would cost.
2. Sanity-check the dwelling limit itself. ERC is a percentage of your limit, so a low limit leaves a small cushion. Ask for the insurer’s rebuild cost estimate and compare it with local construction costs, square footage, and upgrades you’ve made.
3. Review ALE / loss of use. Rent near you after a regional disaster can climb quickly. Check whether your limit is a dollar cap or a time period.
4. Ask about building code upgrade coverage. In high-fire areas, rebuilding to current code can add significant cost.
5. If you’re in a high-fire area or on the FAIR Plan, re-shop. Admitted, FAIR Plan + DIC, and surplus lines options differ in how much ERC they offer. More context: high-fire-risk home insurance in California.

Related: our California home insurance page and wildfire smoke claims overhaul post.

FAQ: SB 876 and extended replacement cost

When does the 50% extended replacement cost offer start?

The chaptered text of SB 876 makes the new offer requirement operative January 1, 2028, for policies issued or renewed on or after that date. Some carriers already offer 50% or more today, so you can ask now.

Will I be required to buy 50% extended replacement cost?

No. Insurers must offer it and show the premium. You can decline, but the insurer will record your declination and note it on your declarations page.

Does this apply to the California FAIR Plan?

The rebuild cost estimate requirement is extended to FAIR Plan policies when replacement cost coverage is available and your limit is below the FAIR Plan’s maximum. The 50% ERC offer applies to residential property insurance policies for properties eligible for replacement cost coverage.

Is extended replacement cost the same as guaranteed replacement cost?

No. Extended replacement cost pays up to a set percentage above your dwelling limit, such as 25% or 50%. Guaranteed replacement cost, where available, isn’t capped at a percentage.

How ESI can help

At ESI Insurance Brokers (Express Service Insurance Agency, Inc.), we help California homeowners, landlords, and property owners compare admitted carriers, the FAIR Plan with DIC, and surplus lines options. That includes checking whether your dwelling limit and extended replacement cost would actually cover a rebuild. You don’t need to wait until 2028 to fix a coverage gap.

Get a California homeowners quote →

Or call (415) 440-5136 · CA LIC# 0G83954 · esibrokers.org

Sources

• San Francisco Chronicle: “New California law will change how you sign up for home insurance” (Sept. 28, 2026)
• Office of the Governor: Legislative update, Sept. 27, 2026 (SB 876 and SB 1301 signed; SB 877 and SB 878 vetoed)
• California Legislative Information: SB 876 (Padilla), Fire and residential property insurance, chaptered text
• Sen. Steve Padilla: “California Legislature Greenlights Comprehensive Insurance Claim Reform” (Sept. 1, 2026)

This article is general information, not legal advice or a coverage determination. Your policy terms control. Ask your broker how these changes apply to your policy.