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The rental property market in California is booming, and landlords are in a great position to find high-quality tenants. That said, there are risks that come with renting properties in the Golden State- and owning a property there in general.
Landlord insurance is a vital part of owning and operating a rental property business- no matter how big or small your portfolio is. Understanding what landlord insurance is, how it works, what it costs, and why you need it is essential for California landlords.
National Average Costs of Rent and Landlord Insurance in the US
First, let's talk a little about the US rental market in the US and landlord insurance costs nationwide.
According to rental data for 2023, the average monthly cost of rent in the US overall is $1,372. California is comparatively high- the second highest state average cost, in fact, at just over $1,950.
This means that in a year, the average landlord in America makes close to $16,500 in rent per property, and California landlords make almost $23,500.
Although policy prices vary significantly, the average cost of landlord insurance in the US is between $2,100 and $2,300 annually. It is a small price to pay considering all the benefits it brings.
What Is California Landlord Insurance?
What is landlord insurance (or rental property insurance, as it is also called) all about, anyway?
To put it simply, it is a type of home insurance policy specifically set up to provide financial protection to landlords and property investors from the things that can go wrong with owning and renting homes.
It generally covers expenses related to damage to the property and other expenses relating to it. The exact ins and outs vary from policy to policy.
The Difference Between Landlord Insurance and Homeowners Insurance
Both landlord insurance and homeowners insurance offer similar types of coverage, so it is understandable why people often get the two confused.
The general rule of thumb for property owners in California is:
- You need homeowner's insurance if you personally reside in the property that you own.
- You need landlord insurance if you own a property but rent it to someone else.
There are a few differences between homeowners insurance and rental property insurance. Because of the additional risks and complications that come with being a landlord and having other people live in your property, a rental property insurance policy offers a few extras that don't come with the alternative.
What Is Covered in a California Landlord Insurance Policy?
Like any type of insurance, the exact coverage depends on the company and policy you choose. There is, however, most have the same base coverage that clients can build on.
Dwelling Coverage
The main idea of property insurance is to pay for damage caused by unforeseen events. Dwelling coverage is the umbrella name for this- it is included in every landlord's insurance policy.
Many things come under dwelling coverage, including:
- Fire damage
- Roof repairs after a storm
- Damage caused by frost, ice, or snow
- Third-party vandalism
- General damage to the structure of the property
As long as the damage is caused by a covered event, dwelling insurance will pay to repair or rebuild your property. What counts as a covered event depends on the policy details.
Additional Structures
If you have any secondary structures, such as garden fences, a garage, or a shed, they are also covered in a standard rental property insurance policy.
Policy Holder's Personal Property
Landlord insurance covers the personal belongings of the policyholder. If the landlord or owner provides furniture, kitchen equipment, décor, or anything else that belongs to them but is in the property for the use of their tenants, these items are covered.
Liability Insurance
Standard landlord insurance policies include some liability coverage for injuries sustained on the property. This insurance covers the cost of medical payments and related expenses when landlords are liable.
What Is Not Covered by Landlord Insurance in California?
Now, let's talk about what is not included in a standard policy.
Tenants Belongings
Items belonging to your tenants are not covered by landlord insurance. If there is a fire, for example, the insurance policy only pays to replace the items that you, as the policyholder, own.
Renters insurance exists for tenants to protect their belongings in these events. Like landlord insurance, renters insurance is not required by law in California, but landlords have the right to make it one of the conditions of the lease agreement.
Repairs and Replacements on Appliances and Equipment
Landlords in California are responsible for repairs on things such as heating systems, hot water, and light fixtures. If you decide to provide an air con unit or any kitchen appliances, it is also best practice to take care of those repairs as well.
Insurance does not pay for general maintenance or replacements of appliances or equipment simply because it breaks. It will, however, usually pay for damage caused because of a faulty or leaking appliance.
Optional Extras
An average landlord policy will come with the basics and have the option to add additional coverage to suit your needs. It is important to note that some of the optional extras that are not usually included are actually very important for California landlords, so be sure to check what is and is not covered.
Some of the most important additional coverage options that may not automatically be included are:
- Loss of rent coverage
- Property damage caused by a tenant's malicious actions
- Flood Insurance
- Earthquake insurance
- Legal liability insurance
- Vacancy coverage
- Water damage and pump failure insurance
Why Is Landlord Insurance Important for Rental Property Owners in California?
As California property investors or owners, having a good insurance policy is essential- whether or not you have a tenant in place. Known as The Land of Extremes, California is in the top five most at-risk states for natural disasters- most notably floods, earthquakes, and fires. Any one of these events could be catastrophic for your property.
If your property is damaged by this severe weather that often hits California to the point that it is uninhabitable, you will lose the rental income that the property would generate. With loss of rent insurance, your policy pays out to support you in the interim.
Aside from natural disasters, you still have the day-to-day risks that come with renting your properties. Disputes with tenants can lead to court cases- landlord liability insurance covers you. A pipe bursts and floods the apartment- destroying your furniture and causing thousands of dollars worth of structural damage. Your insurance covers it.
In short, the unpredictable and unexpected can and do happen, and without adequate landlord insurance, you will have to foot the bill yourself.
What Is the Cost of Landlord Insurance Coverage in California?
The overall average cost of California landlord insurance is roughly $1,350 per year, but this is not a clear indication of how much your policy is likely to cost.
Too many factors contribute to insurance rates to set a rough estimate- the best way to know is to get quotes from a few different providers.
Premium prices vary depending on how much landlord insurance coverage you need and the condition of your property. Its location, size, age, and building type will also come into play.
How Are California Rental Property Insurance Costs Calculated?
An insurance agent will usually give you a rough insurance quote calculated using the following information:
- What basic policy you are interested in
- What add-on coverage do you want
- The deductible amount
- The square footage and age of your property
- How high-risk your property is for extreme weather conditions
Before a final agreement is made, a property inspection is usually carried out to establish the actual condition of the property and check for anything that may increase or decrease the overall risk.
Ways to Save Money on Your California Landlord Insurance Policy
You can potentially lower the cost of insuring your rental properties. Here are some ways to do it.
- Check what landlord insurance discounts you qualify for with different companies.
- Consider raising the amounts of your deductibles.
- Look into the California FAIR program.
- Upgrade your property's roof with storm-resistant materials and make other storm mitigation efforts.
- Make renters insurance a condition of your lease agreement.
- Screen tenants efficiently using DoorLoop.
- Prioritize safety and security features.
- Be well prepared for the inspection.
Five Great Landlord Insurance Companies in California
The best landlord insurance for you depends on your budget and requirements. Policies vary significantly, as do costs- so it is important to shop around to find the best deal.
Here are five California landlord insurance companies worth taking a look at.
DoorLoop: The Ultimate Property Management Tool
Securing yourself great insurance coverage is only one part of doing the best for your property rental business. Using a tool that streamlines your daily tasks and makes running your company more manageable is just as important.
DoorLoop is a comprehensive property management program that lets landlords tackle the rental market efficiently, conveniently, and successfully. Bringing together all the things that go into being a landlord on one user-friendly platform saves you time, effort, and stress.
It doesn't matter if you are an independent landlord looking after one or two units or a large-scale property manager in charge of 100 rentals- DoorLoop's features have plenty to offer.
What are these features? Here are just a few of the best bits.
- Send payment reminders and collect rent online.
- Communicate easily with tenants through multiple channels.
- Create and post personalized marketing for your properties on leading listing websites.
- Manage maintenance requests and stay up to date with ongoing issues.
- Screen tenants easily through a customized application website.
- Keep all your financials in one place, and use the accounting tools to make it all easier.
- Help your renters gain access to the information they need on the tenant portal.
To sum it up, DoorLoop supports landlords and property managers at every stage. It is an all-in-one tool that makes an incredible difference.
You can try it for yourself or learn more by scheduling a free demo today!
Final Thoughts
Landlord insurance can help cover you from unexpected financial turmoil in your property management business. Without it, you leave yourself exposed to the risks that come with owning and renting property in California.
The Golden State is an excellent state to be in for rental property owners and landlords as far as the market is concerned, but the ever-present risks make insurance a must-have commodity.
DoorLoop helps you take care of everything else. Keep your finances protected and your rental property business in good shape with landlord insurance and DoorLoop.
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