Section 2051.5 is California's rulebook for replacement cost claims. It answers three questions: how payment works, how long the insured has, and where the insured may rebuild.

How payment works: when a policy requires repair or replacement to collect full replacement cost, the insurer pays actual cash value first and the difference after the work, up to the full replacement cost reasonably paid, within limits. This applies to personal property as well as the dwelling. For real property, an open replacement cost residential policy must also include building code upgrade coverage of at least 10% of the dwelling limit, in addition to that limit (Section 10103(c)).

How long: the policy may not limit the time to collect full replacement cost to less than 12 months from the first actual cash value payment, or 36 months for a loss relating to a state of emergency. In either case, the insurer must add six-month extensions for good cause when an insured acting diligently faces delays beyond their control.

Where: an insurer cannot limit or deny replacement cost because the insured rebuilds at a new location or buys an already built home elsewhere. The measure of indemnity is what would have been recoverable at the original location, and on a residential policy no deduction for the value of land at the new location is allowed (Section 2051.5(c)).