SB2964 HD1

SECTION 1. The legislature finds that widespread underinsurance slows community disaster recovery and increases the cost of aid provided by nonprofit and governmental entities. The legislature further finds that the 2023 Maui wildfires revealed that many homeowners were severely underinsured, leaving many affected residents unable to rebuild and forcing them into debt or permanent displacement.

The legislature recognizes that the State faces rapidly escalating rebuilding costs due to its geographic isolation and reliance on imported materials, high labor costs, limited workforce availability, and lengthy permitting and rebuilding timelines. These factors cause replacement costs to rise quickly, often outpacing policy limits if coverage is not reviewed regularly.

The legislature notes that most homeowners do not receive annual updates about whether their coverage matches the current cost of rebuilding. Homeowners often discover that they are underinsured only after a catastrophic loss. This lack of transparency leaves policyholders vulnerable and less likely to fully recover following a disaster.

The legislature finds that further efforts are necessary to provide homeowners with opportunities to ensure they have adequate coverage to fully replace the residence after a loss. Without these opportunities, homeowners may unknowingly remain underinsured, post-disaster rebuilding delays may increase, and nonprofit and government disaster relief efforts may face higher costs and longer timelines.

Accordingly, the purpose of this Act is to:

(1) Require homeowners insurance producers to notify policyholders that they may submit information regarding improvements made to the insured residential property, which shall then be submitted to the homeowners insurer;

(2) Require homeowners insurers to reevaluate the replacement cost estimate based on the information submitted by a policyholder, and offer the policyholder the option to purchase additional coverage to cover the full amount of the replacement cost estimate; and

(3) Establish an administrative penalty.

SECTION 2. Chapter 431, Hawaii Revised Statutes, is amended by adding a new part to article 10E to be appropriately designated and to read as follows:

"PART . REPLACEMENT COST DISCLOSURE AND INSURANCE TO VALUE

§431:10E-A Definitions. As used in this part:

"Dwelling coverage limit" means the maximum amount the homeowners insurer will pay to repair, rebuild, or replace the home's physical structure and attached items after a covered loss.

"Homeowners insurance" has the same meaning as defined in section 431:14-110.8.

"Homeowners insurer" has the same meaning as defined in section 431:14-110.8.

"Policyholder" means the person named as the insured under the homeowners insurance.

"Replacement cost" means the amount necessary to repair, rebuild, or replace damaged property with materials of like kind and quality, without deduction for depreciation.

§431:10E-B Biennial notice requirement. (a) At least once every two years, each insurance producer of homeowners insurance shall provide the policyholder with a written notice informing the policyholder that the policyholder may submit information regarding improvements made to the insured residential property, including the type of improvement and the costs of that improvement, for purposes of preparing an updated replacement cost estimate.

(b) The notice shall be delivered in paper format; provided that the insurance producer may allow responses to be submitted electronically.

§431:10E-C Offer to insure to replacement cost. (a) Information regarding improvements made to the insured residential property received by an insurance producer pursuant to a notice under section 431:10E-B shall be submitted to the homeowners insurer.

(b) The homeowners insurer shall use the information to reevaluate the replacement cost for the insured residential property. If the dwelling coverage limit is less than the replacement cost, the homeowners insurer shall offer the policyholder the option to purchase additional coverage under the homeowners insurance to increase the dwelling coverage limit to equal the replacement cost.

(1) Include the premium for the increased coverage;

(2) Remain open for thirty days; and

(3) Be renewed annually.

§431:10E-D Administrative penalty. A person that commits a violation under this part shall be subject to a fine of $250 for each violation."

SECTION 3. In codifying the new sections added by section 2 of this Act, the revisor of statutes shall substitute appropriate section numbers for the letters used in designating the new sections in this Act.

SECTION 4. This Act shall take effect on July 1, 3000.

Report Title:

Homeowners Insurance; Underinsurance; Replacement Cost Value; Notice; Offer to Insure to Value; Administrative Penalty

Description:

Requires homeowners insurance producers to notify policyholders that they may submit information regarding improvements made to the insured residential property, which shall then be submitted to the homeowners insurer. Requires homeowners insurers to reevaluate the replacement cost estimate based on the information submitted by a policyholder, and offer the policyholder the option to purchase additional coverage to cover the full amount of the replacement cost estimate. Establishes an administrative penalty. Effective 7/1/3000. (HD1)

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.

THE SENATE	S.B. NO.	2964
THIRTY-THIRD LEGISLATURE, 2026		S.D. 1
STATE OF HAWAII		H.D. 1