California landlord insurance can be the difference between a profitable investment property or a financial mess. If something can go wrong it will and landlords in CA know this better than most. It is easy to get the proper protection but not all rental property owners understand why they need landlord insurance versus homeowners insurance.
When you rent out a home there are a number of potential risks that you face as a landlord. This would include liability for injury to the tenant from the lack of maintenance on the property or property damage to the tenant's personal belongings.
How do you protect the building property you own in addition to the liability risk that being a landlord includes. The answer is landlord insurance.
LandlordInsuranceQts.com is a leader in providing a single point of reference for landlords to get information regarding insurance and basic rental property knowledge. We can provide each landlord with multiple quotes from leading insurance carriers from across the nation. By comparing coverage and rates from companies like State Farm®, Farmers Insurance Group® and Allstate® you can determine which landlord policy is best.
Landlord Building Coverage in CA
Many landlords own multiple properties in California or at least manage multiple units. Landlord building insurance is simply the primary coverage on a landlord policy that protects the structure of your rental. In fact the other policy coverage is usually a percentage of this amount so it is crucial to make sure you have the proper coverage limits.
Getting a reconstruction cost estimate is probably the most accurate method to determine how much building coverage you need on your property. This estimate is completing by a qualified construction specialist which uses the most recent data to determine how much it will cost to rebuild your home.
This data includes such items as demolition, permits, materials cost, labor cost, and other metrics that go into a final calculation of reconstruction.
Some insurance companies will be able to capture basic information about your rental property and provide a rough estimate for reconstruction cost but it is ultimately up to you to make sure it is enough. The last thing you want is a total loss from a fire and you don't have enough coverage to get the building back to the previous state.
California Landlord Liability Insurance
Landlord liability is a growing concern among investment property owners for good concern. It is one of the most costly losses a landlord will incur if something bad happens. In fact it can cost millions of dollars in some cases which massive injuries or deaths have occurred. The single best way to prepare yourself and protect your net worth is getting landlord liability insurance.
The good news is that landlord liability coverage is usually a standard coverage item on most landlord insurance policies but make sure you have enough. Enough coverage would take into consideration your net worth and potential earnings for the next ten years. While this sounds like a lot it is not that expensive to have this coverage and it will be priceless if you need it.
Most rental property insurance policies will come with at least $300,000 in landlord liability coverage but make sure you get at minimum $1 million which should only increase the policy by $50 to $100 per year. If you feel you need more coverage it is advised that you look at getting an umbrella policy which extends liability coverage above your auto and home policies.
Cost of Landlord Insurance in California
The cost to insure your rental property in CA is dependent upon numerous rating factors that home insurance companies use to determine the proper premium. When you own a condo or townhouse the cost of landlord insurance is very minimal because usually you split that cost with the homeowners association which insurers the exterior of your unit. If you insure a single family home or rental complex then your insurance costs are going to be much higher due to the replacement cost of the building is solely your responsibility.
Here are a few of the most common rating factors that insurance companies use to determine your landlord insurance premium:
- Credit rating - This is your personal credit rating which is similar to a FICO score but can be based on other specific criteria such as payment history and bankruptcy.
- Location - The zip code or city that your rental unit is located in has a dramatic effect on your insurance premiums as companies who have big losses in those areas will increase rates to get profitable.
- Building type - This can be numerous things including condo, single family, and townhouse including the materials used to construct the property.
- Claim history - If you have one or more claims in the past 3 years as a homeowner most insurance companies will surcharge your premium. Some companies may not even accept your business if you have more than two.
- Discounts - If you have more business with an insurance carrier they are more likely to offer discounts to keep all of your business with them.
How to Find The Cheapest Landlord Insurance in CA
Each insurance company is different in the way they determine your rate and how much the average policy will cost but here are ways to ensure the lowest cost premium based on the factors above.
- Good Credit - The better your credit the lower the cost of your insurance. Many states are now allowing credit as a rating criteria so get used to it being used. Try to keep your past payment history spotless and a FICO score above 720 is considered excellent.
- Improve the Location - There is not much you can do about the location once you have purchased the rental property but be sure to keep the home well-kept and surrounding trees cut back to minimize potential hazards. The better your property appears the lower the cost to insure it will be.
- Building type - Condo and townhouse owners will likely have a home owners association which will cover the exterior of the home so you are only responsible for the interior. This can save you hundreds of dollars each year. If the unit includes custom building and expensive materials expect to pay more because the cost to replace those items is greater.
- No Claim history - Try not to make a claim if it is a small value of $2000 or less. Most companies look at multiple claims as a sign that you are prone to making claims in the future. If you are deciding whether to make a claim or not contact your insurance agent and ask them personally. Don't call the claim department and ask them because they are likely to document the call and file it for future use.
- More Discounts - Ask about multiple policy discounts and the combination of auto and home insurance. Sometimes combining your personal auto insurance with this policy can save you 20-30% off each policy.
California's 5 largest cities by population
City - Population
Los Angeles 3,792,621
San Diego 1,307,402
San Jose 945,942
San Francisco 805,235
*Data from 2010 Census Population by the Department of Economic and Community Development.
Common Landlord Insurance Claims in CA (California)
(Most claims cost over $7,000 to repair water damage)
(Most claims cost over $3,000 to repair damages from wind)
(Most claims cost over $37,000 to repair damage from fire)
(Most claims cost over $22,000 to recoup damages of liability)
(Most claims cost over $11,500 to repair physical damages)
NOTICE: The amounts listed above are for illustrative purposes only and should not be used to decide what coverage limits you need for your landlord policy. Speak with your insurance agent to determine the proper coverage limits.