This California law section mandates that a home protection company must have at least $40,000 in net worth if they issued or renewed 1,000 or fewer contracts last year. If they have more contracts, they need an extra $20,000 in net worth for every additional 500 contracts, which continues up to 10,000 contracts. Net worth here means the company's admitted assets minus its liabilities and necessary reserves, with at least $20,000 of that net worth coming from paid-in capital.

This law states that home protection companies that had issued contracts before January 1, 1979, which were exempt from certain regulations, must treat part of the fees they received as if they are insurance premiums. These fees need to be held in a financial reserve as required by another specific section, like premiums. However, these fees shouldn't be considered as premiums for taxation purposes under a different section of the tax code.

This law section requires home protection companies to file an annual statement about their financial condition. The detailed requirements for these filings can be adjusted by the commissioner to suit the home protection business. Additionally, the commissioner has the authority to examine the business and finances of home protection companies as necessary, but no more than once every five years unless significant financial issues arise. The commissioner can also extend the examination period by up to two years based on factors like the company's reserves and net worth.

This law requires home protection companies to set aside a reserve fund for unearned premiums—money from premiums that corresponds to coverage periods that haven't occurred yet. Specifically, they must hold at least 40% of the total premiums from contracts currently in force. For contracts lasting over 12 months, 100% of the fee for coverage beyond 12 months must be reserved upfront, but adjusted to 40% for each subsequent year. If a home protection contract covers the selling or listing period of a property, the premium for that period is fully earned once escrow closes and payment is received.

Additionally, the reserve doesn’t need to include fees if there is reinsurance to cover any outstanding risk. The format for reporting these reserves can be determined by regulations established by the commissioner.

If a home protection company's net worth falls to less than half of what is required by another law (Section 12750), it's considered financially insolvent.

This law states that a home protection company can generally only invest in certain assets as described in specific legal sections. However, part of its assets, as determined by regulations from the commissioner, can be invested in physical items like fixtures or appliances. These items are meant for repair or replacement under their home protection agreements.

This law states that specific rules from another part of the insurance code don't apply to home protection companies. In other words, home protection companies are exempt from the regulations set forth in Article 14.2 starting with Section 1063.