A Guide to California Landlord Insurance

The rental property market in California is experiencing a surge, and landlords have an opportunity to find good tenants. But some risks come with renting out properties in California or just owning property there in general. 

64% of properties in the US are underinsured by an average of 27%. Owners should consider buying landlord insurance as it can help avoid costs incurred due to vandalism, natural disasters, and potential liability lawsuits.  A typical homeowner’s insurance will not cover such damages. 

Landlord insurance is crucial for running a rental property business, whether you own a lot of properties or just one. It’s essential for California landlords to know what landlord insurance is, how it works, how much it costs, and why it’s necessary. 

What is Landlord Insurance California? 

In simple terms, it’s a kind of home insurance designed to financially help landlords and property investors with the things/situations that can go wrong with the rental properties. 

Typically, it covers costs related to property damage and other related expenses. However, the specifications of insurance can vary from one policy to another. 

What is Covered in Landlord Insurance Policy California? 

In the US, the cost of landlord rent insurance is 20% to 30% higher than the average homeowner’s insurance. Typically, landlord insurance would cost 20% to 30% more than other conventional property insurance. But this largely depends on the extent of coverage that the owner is looking for. The linear equation being increased coverage is directly proportional to increased costs. Before you upgrade your policy or purchase a new plan, look at a few additional coverages to help you make a better decision. 

1. Property Damage Coverage

This type of landlord insurance protects you from any damage to the building structure. It’s amongst the most economical policies to cover expenses incurred on account of natural incidents including fire, earthquake, windstorm, and hailstorm. The cost will depend on what items are in the building you are insuring. It can extend to furniture, pipes, electrical appliances, and so on. 

2. Liability Coverage

Under the premises liability law in California, it’s mandatory for a property owner to make the apartment building free from hazards. If your tenant slips or has any injury, you can be sued. The landlord liability insurance will protect you from the medical and lawyer costs incurred. 

3. Loss of Rent Coverage

With this policy, the insurer can reimburse the rent if a tenant under lease must vacate due to damage caused by any disaster. However, it will not apply if the tenant moves out or is evicted. 

4. Policy Holder’s Personal Property

Landlord insurance covers the personal items owned by the policyholder. If the landlord or property owner furnishes items like furniture, kitchen appliances, decorations, or anything else that belongs to them but is used by the tenants in the property, these items are included in the coverage. 

5. Additional Structures

If you have any additional structures like garden fences, a garage, or a shed, they are also included in a regular rental property insurance policy. 

6. Additional Policies

Apart from the common categories, consider paying for emergency coverage, guaranteed income insurance, and flood insurance. Let’s say your tenant notifies you about a water leak on the premises. The emergency coverage will include the cost of your travel to the apartment. On the other hand, the guaranteed income insurance ensures you’re compensated if the tenant is not able to pay you the full rent.  

What is Not Covered by Landlord Insurance in California? 

Here is the list of what is not included in California landlord insurance: 

1. Tenant Belongings 

Belongings owned by your tenants aren’t included in landlord insurance coverage. In case of a fire, for instance, the insurance policy only covers replacing the items that you, as the policyholder, own. 

Renters insurance is available for tenants to safeguard their belongings in such situations. Like landlord insurance, renters’ insurance isn’t mandated by law in California, but landlords can choose to make it a condition of the lease agreement. 

2. Repairs and Replacements on Appliances and Equipment 

In California, landlords have the responsibility to handle repairs for essentials like heating systems, hot water, and light fixtures. If you choose to offer additional amenities like air conditioning units or kitchen appliances, it’s recommended to manage these repairs also. 

Insurance typically doesn’t cover routine maintenance or the replacement of appliances or equipment just because they stop working. However, it generally covers damages resulting from faulty or leaking appliances. 

3. Optional Extras 

A standard landlord policy typically includes essential coverage and offers the flexibility to add additional coverage to meet your requirements. It’s crucial to understand that certain additional optional, usually not included, are particularly significant for landlords in California. So, it becomes important to ensure what’s included and what’s not. 

Here are some additional coverage options that might not be automatically included: 

1. Loss of rent coverage 
2. Property damage caused by a tenant 
3. Flood insurance 
4. Earthquake insurance 
5. Legal liability insurance 
6. Vacancy coverage 
7. Water damage and pump failure insurance 

Understanding the Importance of Rental Property Insurance California for Landlords 

For property investors or owners in California, having an insurance plan is crucial, even if your property doesn’t have a tenant. California is often hit by severe natural disasters like floods, earthquakes, and fires, putting your property at risk. 

If your property gets severely damaged by these disasters to the point where it can’t be lived in, you’ll lose the rental income it would bring. With loss of rent insurance, your policy steps in to help you financially during this time. 

Besides natural disasters, there are everyday risks involved in renting out properties. Disputes with tenants might end up in court—landlord liability insurance protects you in these situations. Imagine a scenario where a pipe bursts, flooding the apartment and causing extensive damage to your property and belongings. Your insurance will cover the costs. 

Overall, unexpected events can and do occur, and without proper landlord insurance, you’ll have to cover the expenses yourself. 

What is the Cost of Landlord Insurance Coverage in California? 

The overall yearly cost of landlord insurance in California is around $1,350 on average. However, this doesn’t give you a clear idea of what your own policy might cost. 

Many factors contribute to insurance rates, so it’s hard to estimate. The best way to find out is to get quotes from different insurance companies. 

The premium price depends on how much coverage you require and the condition of your property. Factors like location, size, age, and the type of building also influence the cost. 

How Are California Landlord Insurance Rates Calculated? 

Typically, an insurance agent will estimate your insurance cost based on these details: 

1. What basic policy you are interested in 
2. What add-on coverage do you want 
3. The deductible amount 
4. The square footage and age of your property 
5. How high-risk your property is for extreme weather conditions 

Before finalizing the agreement, a property inspection is usually done to see the real condition of the property and check for anything that might raise or lower the overall risk. 

How to Find Cost-effective Landlord Insurance Policies 

1. Comparing quotes and coverage with independent insurance agents

Several insurance companies offer different types of landlord insurance policies. These are based on the number of properties you own, the value of the unit(s), and their location. Once you have gathered all the information and quotes from different insurance carriers, compare them against what they’re going to offer. 

Remember, cheaper landlord insurance will not cover every cost incurred due to disaster and provides very minimal coverage for the loss of rental income.  

2. Quality of customer service offered by an insurance carrier

Choose a prominent company that can respond to demanding situations at your property 24/7. Such carriers should have a large team that can allocate costs and resources for repairs proficiently. If the company is not able to provide immediate solutions in case of disasters, you will end up paying from your pocket. 

Conclusion 

Landlord insurance provides a safety net for your property business by protecting you from unexpected financial troubles. Without it, you are vulnerable to the risks of owning and renting property in California. 

While California’s rental market is great for property owners and landlords, the constant risks make insurance essential. 

To choose the best landlord insurance policy, you must consider the factors discussed above. Alternatively, you can consult us for all property management needs in Southern California.