In response to the devastation caused by the Palisades and Eaton fires, California Governor Gavin Newsom is set to sponsor legislation allowing homeowners to earn interest on insurance payouts held in escrow. This bill, authored by Assemblymember John Harabedian, aims to provide essential financial support for homeowners during rebuilding efforts. While current law allows homeowners to earn interest on funds related to property taxes and insurance, it does not extend that benefit to insurance payouts. The bill is expected to be introduced soon, potentially benefiting homeowners with significant interest accrued during reconstruction.
Homeowners rebuilding after a disaster need all the support they can get, including the interest earned on their insurance funds.
The state bill will be authored by Assemblymember John Harabedian (D-Pasadena). A spokesperson for Newsom's office said the bill is expected to be introduced by the end of the month.
California law already requires lenders to pay homeowners the interest on escrowed funds for property taxes and insurance but not for insurance payouts held in escrow.
Interest rates are typically about 2% annually, which would amount to roughly $20,000 a year for a $1-million payout for a destroyed home.
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