November 1, 2022

A Guide to California Landlord Insurance

Learn the unique factors that affect the price of California landlord insurance, as well as strategies to lower your premiums.

A Guide to California Landlord Insurance

From the foggy skyline of San Francisco and breathtaking views of Yosemite National Park to the picturesque beaches of Santa Barbara and bustling streets of Los Angeles, California is one of the most popular places to visit in the United States. 

But despite all that California has to offer, living in this state also comes with risks — especially for landlords who own properties in wildfire-prone regions or coastal areas. Unexpected floods, fires, and earthquakes can amount to steep costs if landlords aren’t properly prepared with the right insurance coverage.

Here, we explore which factors affect the price of California landlord insurance, how to protect your rental portfolio, and strategies for lowering your premiums. 

A brief overview of California’s real estate market 

California is home to several highly populated cultural hubs — including the Bay Area and Silicon Valley, Los Angeles, San Diego, and Sacramento. As cities continue to grow, the cost of living rises and available real estate becomes more limited — making rental housing a popular choice for Californians. 

While a strong rental market is positive for landlords, owning rental property in California also comes with a host of challenges. For one, it’s increasingly difficult to get comprehensive landlord insurance because of the hazards associated with owning property in this state, including wildfires, earthquakes, and coastal flooding.

California is also particularly strict about maintaining a high quality of living for renters — and enforces laws around renters rights, building codes, and more. Landlords in California must be thorough and consistent about keeping up with these rules; otherwise they risk legal ramifications. 

Another unique factor that comes into play in California’s rental market is that many tourists are visiting for vacations. Landlords can purchase property and rent it out on a long-term basis, but it’s also a great market for short-term rentals near Disneyland, Lake Tahoe, Sequoia National Park, and other major tourist attractions. While managing a short-term vacation rental can be lucrative, landlords should also be aware that the high turnover requires more time and involvement as tourists come in and out each week. 

All this is to say: many factors affect California landlord insurance rates, and these rates can vary greatly depending on the challenges unique to your area and property. It’s critical that landlords are aware of the unique risks their properties face and prepare with the proper coverage. 

How much insurance do I need for my California investment property?

While some states and zip codes require minimum coverage or specific policies — as do mortgage companies — choosing how much landlord insurance you buy is primarily a personal decision. That said, there are some important factors to consider when setting the limits of your personal property and liability coverage in California, including:

  • Your property’s unique risks. Are you on the coast? Close to a body of water? In a high-rise building? If so, your property may be more susceptible to damage from wind, water, and other natural perils. Be sure to have coverage in place for these types of perils, and ask your agent to recommend other policies or coverages that may help you be more comprehensively protected.
  • How much of your personal property is available for tenant use. What personal property can tenants use, and how expensive is this property? This helps determine your personal property limits on a landlord insurance policy.
  • Your personal risk tolerance. What makes the most financial sense for you? Are you willing to have a higher deductible for lower premiums?

By answering these questions, you can make a more informed decision about how much coverage makes the most sense for you and your property. That said, there are some California-specific considerations that should factor into this decision-making process.

Important considerations for California property insurance

While landlord insurance is not required by law in California, it’s highly recommended that rental property owners protect themselves and their investment with proper coverage. In some cases, property insurance may also be required by your homeowners insurance or mortgage provider.

Here are some of the unique insurance considerations for California landlords:

  • Wildfires: Although wildfires are part of the natural landscape in states like California, research shows that fire season is starting earlier and ending later each year — in large part due to the ongoing effects of climate change. Now more than ever, landlords need to consider wildfire coverage before an emergency strikes. Many homeowners already have fire damage covered as a peril in their regular insurance plans, but this can vary based on insurance carrier or geographic location. For this reason, it’s essential that landlords check their policy or consult their insurance agent first to understand whether wildfires are included in their coverage, or whether the policy exclusively covers home fires. California landlords should also note that some insurance carriers will specifically exclude wildfire damage for properties in certain high-risk zip codes, geographies, or even during certain times of year.
  • Earthquakes: For rental properties along fault lines or in locations historically prone to earthquakes, earthquake coverage is a particularly good idea. In many cases, this is not included in standard landlord insurance but has to be added on as an endorsement or even a separate policy. It’s important to talk to an insurance agent first about whether or not this type of coverage is required for your property’s location to avoid any legal repercussions. As a landlord, you may be liable if the structure of the property isn’t sound during an earthquake and your tenant is injured. 
  • Floods: Believe it or not, floods are the biggest natural hazard in terms of lives lost and overall property damage in the U.S. As the global climate changes, California is experiencing rising sea levels and flooding along its expansive coastline. Landlords need to consider this reality and be prepared before water damage affects their properties. In many cases, the Federal Emergency Management Agency (FEMA) will require flood coverage in high-risk areas. That said, many standard landlord insurance policies don’t cover natural disaster flooding. This is a different scenario than a leak in your home due to a plumbing issue, for example. At-home flood situations are often an optional add-on on typical landlord insurance, referred to as water and sewer/septic backup policy. 

With a partner like Azibo, natural disaster flood insurance is accessible across 51 jurisdictions and covers all types of flooding scenarios, including your basement (as many traditional flood insurance policies don’t cover below ground level). 

Tips for lowering your California landlord insurance premium

Your insurance premium depends on a number of factors, including geographic location, property condition, and claims history. You can also change your rates by adjusting your desired coverage and deductible. Here are a few tips to help you lower your California property insurance premiums:

1. Consider a higher deductible

In California, you have the option to adjust your standard deductible to lower your topline premium. For this reason, raising your deductible can be a strategic opportunity to lower your premium. That said, be sure you aren’t taking on too big of a deductible in the event that you need to make a large claim. 

2. Take advantage of the California FAIR program

The California FAIR Plan was established so that all California property owners have access to basic fire insurance — particularly if their property is high-risk and their primary insurer won’t cover it. While this option won’t necessarily lower your premium, it’s helpful if you’re having trouble getting coverage for your property (e.g. if you’re in a wildfire-prone zone). The FAIR program supplements your standard insurance policy and offers more comprehensive coverage that may have been excluded in a traditional policy that is more risk-averse. This type of coverage also applies to coastal properties at risk of hurricanes or other hazardous situations. At Azibo, we can help you navigate this option through our existing relationship with FAIR. 

3. Relocate strategically 

As a rental property owner, you understand the unique risks of renting your home to tenants — especially on the coast or in a wildfire-prone area. If you’re considering relocation, opt for an inland property that’s farther away from the water but still in a desirable destination. By reducing your property’s risk of fire or flooding damage, you can potentially save significant cash on California landlord insurance and annual premiums. 

4. Prioritize as many safety features as possible

Another way to prepare for risk and lower your premiums is with a thoughtful safety plan. Prioritizing safety measures means outfitting your property with carbon monoxide detectors, replacing traditional water heaters with tankless ones, installing fire-resistant roof coverings (instead of wood shingles), and ensuring bookcases or heavy furniture are hooked to the wall if you’re offering a furnished rental property. Some carriers may offer discounts for going the extra mile to prioritize safety. Even if they don’t, it’s a good idea to protect yourself and decrease liability by putting more precautions in place.

5. Require renters insurance for tenants

Another way landlords can better protect themselves and lower premiums is by requiring renters insurance for tenants. While renters insurance is not required by law in California, some landlords may require it on a case-by-case basis. This is an excellent way to set expectations early on, help renters protect their belongings, and ensure your investment is protected. In a state like California where renters rights are taken very seriously, it’s a good idea to guide your tenants in this direction. 

Additional California landlord insurance coverages and policies to consider

With the unique risks that California landlords face, investing in additional coverage on top of your standard landlord insurance can help you and your investment stay protected. Here are some additional policies you may consider:

  • Loss of rent coverage: While rent loss coverage is optional, it’s highly recommended in a state like California that’s prone to natural disasters. When a rental property is severely damaged by a natural disaster, accident, or tenant negligence, it becomes uninhabitable and unable to be rented out. Due to this forced vacancy, landlords can’t collect rent payments and will lose their rental income until the property is repaired. With rent loss coverage, the financial burden of a vacant rental property is less severe so long as the cause of the claim is covered by the policy. 
  • Umbrella insurance: As with loss of rent coverage, landlords don’t have to get umbrella insurance in California — but it’s a great idea to have comprehensive liability coverage in this highly populated, litigious state. Umbrella insurance helps protect you and your assets in two scenarios: if your primary insurance policy (regular homeowners, landlord, auto, or watercraft policy coverage) doesn’t cover you for a specific scenario, or if you get caught up in an expensive lawsuit that exhausts the financial limits of your primary plan. 
  • Theft and vandalism coverage: This insurance coverage doesn’t refer to damage by a tenant, but rather if someone breaks in and damages a window, spray paints the walls, or causes other structural damage. While this coverage is also optional, it may be a good idea if you live in a highly populated area that has a higher crime rate like Los Angeles or San Francisco. 

Partner with a specialized local insurance agent through Azibo

Navigating landlord insurance policies is difficult in any state — but especially in California. Committed to enhancing the landlord experience, Azibo is the only national online commercial insurance producer focused solely on independent landlords. 

Landlord insurance typically costs about 20% more than homeowners insurance. According to NerdWallet, the average cost of homeowners insurance in the U.S. is about $1,784 per year. This would mean the average landlord premium is approximately $2,141 per year. Yet many Azibo customers pay annual premiums under $1,000 for landlord coverage. We’re proud to provide you with quick access to a curated set of high-quality insurance carriers — so you get the right coverage, at the right price. 

Ready to put insurance hassles in the past? Azibo is here to help. Simplify the California landlord insurance process and get your free quote today

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Looking for more state-by-state insurance guides? Check out these resources: 

Guide to New York Landlord Insurance

Guide to Illinois Landlord Insurance

Guide to Florida Landlord Insurance

Azibo Insurance Services LLC f/k/a Zibo Insurance Services LLC, a wholly owned subsidiary of Azibo Inc, is a licensed insurance producer. Contact us to discuss your specific insurance needs.

Disclaimer: The information provided in this post does not, and is not intended to, constitute insurance advice; instead, all information, content, and materials are for general informational purposes only. This content may not constitute the most up-to-date insurance information. Readers must contact a licensed insurance agent or company to obtain quotes, advice, and guidance with respect to any insurance matter. No reader, user, or browser of this article should act or refrain from acting on the basis of information herein without first seeking the advice of a licensed insurance producer.