California to require insurance discounts for property owners who reduce wildfire risk
California Governor Jerry Brown signed into law on April 21 a bill that mandates property owners pay a reduced rate for their insurance when their property is burned.
The bill is part of Brown’s broader proposal to reduce the cost of housing insurance, his plan to address California’s housing affordability in part by eliminating what he said was the “outrageous” tax credits for mortgage insurance.
The bill, which Governor Brown said “will cut middle-class housing affordability” by making it more expensive for homeowners to insure their properties against wildfire risk, does not require insurers to reduce their rates or give additional money to insurance companies. Rather, the Governor said, the law “will force property insurance companies to accept a new pricing model.”
While the law is part of Brown’s broader housing plan, it is specifically focused on housing insurance and wildfire losses.
The law applies to wildfire-prone properties, defined as dwellings with a home office, a room used for storage, or a room used for personal activities.
The law affects the cost of fire insurance to a homeowner, in addition to the costs of insurance coverage to the insurer.
It also requires the Department of Insurance to study the cost of the insurance.
Under the law, if the insurance company cannot cover the costs of fire insurance, California residents would pay 10 percent—or $25,800 for a $500,000 home that is insured for $300,000.
The bill also creates a new public insurance fund to replace California’s $2,500 cap on the amount of government subsidy to homeowners for a mortgage insurance policy, which the legislation does not change.
The Governor’s housing plan would increase the tax on California homeowners by an additional 2.6 percent, from 9.3 percent on a $1 million home to 12.3 percent on a $3 million home, a move that would