California State-Specific Guide
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California Overview |
| Time Zone | Underwriting, Cancellation and Non-Renewal Periods |
| Pacific Time Zone | •The state’s new policy underwriting period is 60 days. •Non-Renewal: 60 days •Cancellation: 45 days |
| Prorate or Short-Rate Cancellation (Mid-Term) | Premium Increase Notices |
| Per California Insurance Code 10369.9, if the insured cancels, the earned premium shall be computed using the short-rate table last filed with the state official having supervision of insurance in the state where the insured resided when the policy was issued. If the insurer cancels, the earned premium shall be computed pro rata. |
An insurer, at least 60 days, but not more than 120 days, in advance of the end of the policy period, shall give notice of reduction of limits, elimination of coverages, increase in deductibles, or increase of more than 25% in the rate upon which the premium is based. |
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Homeowners Line of Business |
| Special State-Specific Considerations | Over and Under Insurance |
| •California residents can purchase earthquake insurance through the California Earthquake Authority (CEA) or through endorsements with a private-market carrier. •Customers can purchase a “Difference in Conditions” policy (which typically offers all-in-one coverage for landslides, mudflows, earthquakes, and floods). Difference in Conditions policies are sold by surplus lines insurers. |
Per Civil Code Section 2955.5, no lender shall require a borrower, as a condition of receiving or maintaining a loan to provide insurance coverage against risks to the improvements on that real property in an amount exceeding the replacement value of the improvements on the property. |
| Mortgagee-Bill Grace Period | State-Specific Homeowners Documents and Discounts |
| The servicer must make the payment by the due date if the mortgage payment is not more than 30 days overdue. | •Retrofitting Discounts: Seismic retrofits consist of strengthening houses built before seismic building codes were standard practice, to make them more resistant to earthquake damage. |
| Valued Policy State or Non-Valued Policy State | Unique Home Construction |
| Per California Insurance Code 2054, in the event of a total loss to a building, for the insured to recover the whole amount in the policy. In the event of a partial loss, the insured may recover the whole amount of the loss. Provisions in the policy regarding repair or replacement of the building shall prevail over the statute. | •Fire-Proofing: New construction can have wildfire mitigation efforts where the design is lacking vents or roof overhangs where embers can penetrate or become trapped. The roof carries a high rating for fire resistance. Outside staircases are made of steel, and the wood used for decking and trim is mostly a dense hardwood called ipe, which is naturally resistant to fire. •Earthquake Retrofitting and Seismic Upgrades: Techniques such as bolting down the foundation, installing cripple wall bracing, etc. are features that can be added to a home to mitigate earthquake damage. |
| Residual Plans | Deductibles |
| California FAIR Plan: This plan offers a standard fire insurance policy for both the structure and contents with coverage limitations. | For losses associated with a registered earthquake; the standard CEA policy includes a deductible that is 15% of the replacement cost of the home. However, deductibles range from 5% to 25%. |
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Auto Line of Business |
| Special State-Specific Considerations | Unique State Coverages and Laws |
| •Proposition 103 requires the "prior approval" of California's Department of Insurance before insurance companies can implement property and casualty insurance rates. •Not all carriers report electronically in California to the DMV. To see the list of carriers who do report electronically, check out https://www.dmv.ca.gov/portal/dmv/detail/online/vrir/ins_comp_electro •Insurers may develop an optional "Secondary Driver Characteristics" rating factor composed of a combination of the Safety Record, Years Licensed, Gender, Marital Status, Driver Training, and Academic Status. •A mandatory automobile rating factor is the estimated number of miles driven annually for the twelve months following policy inception. |
•California Deductible Waiver: If you carry collision coverage on your car, then you may be eligible for the California Deductible Waiver. With this waiver, your insurance company will pay the collision deductible on your car if an uninsured driver causes an accident. •Affidavit of Non-Use: If a vehicle is currently registered and not in use, the Insured must maintain insurance or notify DMV that they will not be using it by completing an Affidavit of Non-Use (ANU). Upon receipt of a REG 5090, DMV will cancel the registration. The vehicle cannot be driven or parked on California streets, roads, or highway until proof of insurance is received by the department. A reinstatement fee is not due when the registration is cancelled. Vehicles with a PNO or ANU on record are not subject to suspension. •No Pay, No Play: California has a “No Pay, No Play” law that prohibits certain uninsured drivers from receiving financial compensation and other privileges for damages they incurred following an automobile crash. The damages drivers may not receive compensation for include pain and suffering, physical impairment, mental anguish, etc. |
| Required State Limits | Special Automobile Insurance Policies |
| 15/30/5 | •California's Low-Cost Automobile Insurance Program (CLCA): If a driver is considered low income, the state of California offers the CLCA program. The liability limits for this program are lower than the limits usually required by the state. But these limits do satisfy state financial responsibility laws. The limits are 10/20/3. •California Automobile Assigned Risk Plan (CAARP): State insurance plan created for high-risk drivers who cannot get insurance from a standard auto insurance company. |
| Financial Responsibility | State-Specific Auto Documents, Discounts and Fees |
| A mandatory automobile rating factor is the estimated number of miles driven annually for the twelve months following policy inception. | None |
| Stacking of UM Coverages | Suspension Period |
| Stacking not allowed. | Because state law requires continuous liability insurance on all registered vehicles, a vehicle owner should cancel their insurance only after they have turned in their California license plate to the DMV, there is no grace period. |