Is California's new gun law the future of firearm insurance?

If enacted, it would require residents of San Jose, California who own firearms to pay a $25 annual “gun harm reduction” fee and carry basic liability insurance.

Tanza Loudenback

By 

Tanza Loudenback, CFP®

Tanza Loudenback, CFP®

Contributing Reporter & Certified Financial Planner™

Tanza Loudenback, CFP® is a contributing reporter and Certified Financial Planner™ at Policygenius, where she covers personal finance and insurance news. Previously, she was a senior reporter and correspondent at Business Insider.

Published February 2, 2022 | 4 min read

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The San Jose City Council on Jan. 25 preliminarily approved a first-of-its-kind gun safety ordinance. If enacted, it would require residents of the California city who own firearms to pay a $25 annual “gun harm reduction” fee and carry basic liability insurance.

The ordinance will need to pass review again this month before it’s finalized. About 50,000 gun-owning households in San Jose would be subject to the new rules beginning in August, the New York Times reports.

Opponents of the ordinance have filed a federal lawsuit arguing the measure violates the Second Amendment right to keep and bear arms, in part because it says residents who don’t maintain liability coverage could have their firearms seized.

Here’s what the ordinance says and how insurance covers gun owners. 

How do you get liability insurance for firearms?

Liability coverage for legally owned firearms is already included in standard homeowner’s and renter’s insurance policies even though it is not specifically named, says Janet Ruiz, director of strategic communications at the Insurance Information Institute and a chartered property casualty underwriter.

“The city of San Jose will have to clarify if they will accept homeowner’s and renter’s liability insurance policies as they are written,” Ruiz says. As of now the ordinance says gun owners need a policy “specifically covering losses or damages resulting from any negligent or accidental use of the firearm, including but not limited to death, injury or property damage.” It doesn’t state a minimum coverage amount.

“The key word is accidental,” Ruiz says. Intentional harm or violence — as in the case of a mass shooting or other criminal act — is not covered by any liability policy. 

A single liability policy protects every member of your household, but often doesn’t protect people in the same household from each other. For example, an injury resulting from a shooting between people who live together usually won't be covered, even if it’s accidental.

But if you discharge your gun and damage a neighbor’s window, your policy would cover expenses like legal fees or property damages up to the limit stated in your policy, as long as you can prove the damage was not intentional, but caused by your negligence. Some policies cover acts of self-defense too. 

The San Jose ordinance says that if a firearm goes missing, the gun owner is liable for it until it’s reported lost or stolen. 

How much does liability insurance cost?

Liability coverage is often one of the cheapest coverages in a homeowner’s policy. But as with any type of insurance, your premium will be more expensive if your coverage limit is higher. Liability coverage in a standard homeowner’s policy is usually capped at $500,000. That amount of coverage would cost around $50 a year.

You can buy a separate personal umbrella liability policy to add additional coverage so more of your financial assets are protected in the event you’re held liable for the losses or damages in an accident. An umbrella policy worth $1 million costs $150 to $300 a year, according to the Insurance Information Institute. Adding an additional $1 million in coverage would only add about $75 more to the annual cost.

Insurance companies sometimes award discounts on premiums to customers who install or utilize safety measures, like an alarm system on your car or home. The San Jose City Council says that, similarly, the new ordinance can “encourage firearm owners to take safety classes, use gun safes, install trigger locks, or utilize chamber-load indicators” to potentially reduce their insurance costs.

How would the new rules be enforced?

If San Jose’s gun safety measure is enacted, Ruiz says, the city would need to decide whether people’s existing insurance policies that don’t specifically name firearm liability are sufficient and figure out how to collect their coverage information.

The ordinance doesn’t actually require gun owners to formally submit any paperwork showing proof of coverage. It says gun owners need to fill out and sign a form provided by the city stating the name of their insurer and their policy number. They need to keep that form stored with the firearm, along with a receipt showing they paid the annual harm reduction fee. 

The fees collected would go toward nonprofits that provide services to help reduce gun violence, including suicide prevention, firearm safety training and education, domestic violence programs, and mental health services.

Image: Geety - Hirurg / Getty