California Insurance Code 12753 – (a) A home protection company shall maintain a reserve for …
(a) A home protection company shall maintain a reserve for unearned premiums in an amount not less than 40 percent of the aggregate premiums charged on its contracts currently in force.
Amounts to be reserved shall be on a 12-month basis. Where the contract is for a period of more than 12 months, the reserve for unearned premiums for the period beyond 12 months shall be 100 percent of the pro rata portion of the contract fee attributable to the period of coverage in excess of 12 months. The unearned premium reserve for contracts exceeding 12 months shall be reduced to not less than 40 percent of the pro rata portion of the contract fee applicable to the next succeeding 12-month period, as of the first day of the succeeding 12-month period, and each succeeding 12-month period thereafter during which the contract is in effect.
Terms Used In California Insurance Code 12753
- Commissioner: means the Insurance Commissioner of this State. See California Insurance Code 20
- Contract: A legal written agreement that becomes binding when signed.
- Escrow: Money given to a third party to be held for payment until certain conditions are met.
- Home protection company: means any person licensed pursuant to this part which issues home protection contracts. See California Insurance Code 12740
- Home protection contract: means a contract or agreement whereby a person, other than a builder, seller, or lessor of the home which is the subject of the contract, undertakes for a specified period of time, for a predetermined fee, to repair or replace all or any part of any component, system or appliance of a home necessitated by wear and tear, deterioration or inherent defect, arising during the effective period of the contract, and, in the event of an inspection conducted pursuant to subdivision (b) of Section 12761, by the failure of that inspection to detect the likelihood of any such loss. See California Insurance Code 12740
- Protection contract fee: means the consideration received, or to be received, by a home protection company for the issuance of any home protection contract. See California Insurance Code 12740
- Real property: Land, and all immovable fixtures erected on, growing on, or affixed to the land.
Where the home protection contract provides coverage during the selling or listing period of the real property to which the contract applies, the home protection contract fee applicable to this period of coverage shall be deemed fully earned upon the close of escrow, and receipt of payment of the applicable contract fee.
(b) For purposes of this section, such reserve shall not include protection contract fees on home protection contracts to the extent provision is made for reinsurance of the outstanding risk on such contracts.
(c) The commissioner may, by regulation, prescribe the format by which the reserve shall be reported.
(Amended by Stats. 1987, Ch. 664, Sec. 6.)