Liberalization Clause

Earthquakes are no fun to experience. Not only are they terrifying, but they’re also highly destructive and dangerous. But we can’t stop earthquakes from happening, so as building technology advances, places like Los Angeles institute new earthquake retrofitting requirements to help make the buildings around town less vulnerable to earthquake damage.

Liberalization clauses are like the earthquake retrofitting of the insurance world. As laws and regulations change, liberalization clauses force our insurance policies to change with them. Of course, we often have to pay to have our home retrofitted, while liberalization clauses ensure that policy changes happen automatically.

The gist is the same: what we know and do now is different from what we knew and did when the policy was created, so now we’re bringing it “up to code,” so to speak. Clauses like these are super common with property insurance, like auto and homeowner policies, since laws tend to vary between states and are subject to change. They not only protect the insurance company by ensuring they’re offering legally-required coverage, but they also protect us policyholders, because we don’t have to worry that we don’t have the coverage we need.