Insurance Insights: Understanding Property Insurance for Los Angeles County Landlords - Article Banner

When you invest in a rental property in Los Angeles County, your first priority should be to protect that valuable investment. There are several good ways to do that. Inspections are important, good tenant screening can help, and preventative maintenance is essential. You can protect your investment by understanding the laws, investing in improvements and upgrades, and developing positive and cooperative tenant relationships.

Most important, however, is comprehensive insurance. 

There’s a lot to cover when we’re talking about insurance for your property. It’s not as easy as the homeowner’s insurance you likely have on the home you’re living in. As a rental property owner, you have to be concerned with the insurance that you will need for yourself and the insurance that your residents will need to protect themselves and their own belongings. 

There is a lot of nuance when we’re talking about property insurance for Los Angeles County landlords. We’re sharing some insights on insurance today, because it’s important to understand all the ways in which you need to be covered. The policy you have in place will have a big impact on how effective you can be in keeping your property and your tenant safe.   

Landlord Insurance and Your Los Angeles County Dwelling

Dwelling coverage is really the starting place for any insurance policy. This is what protects your investment property against any perils such as fire, wind, hail, or structural collapse. Your personal property that’s inside the rental home will also be covered. Appliances, for example, would be repaired or replaced during a covered event. 

In some cases, your dwelling coverage will also protect you against incidents of vandalism as well as theft. If a sewer or a drain backs up and causes damage to floors, you can file a claim for the cost of repairs and replacements. 

As you compare and evaluate potential landlord insurance policies, make sure you’re choosing one that provides protection for your dwelling against all the normal catastrophes that can damage or destroy property as well as:

  • Protection against unexpected vandalism and theft inside the property. You might have a disgruntled tenant who makes off with a washer and dryer when they move out. Or, they’ll leave behind destruction that goes well beyond property damage and is defined as vandalism.
  • Ease of conversion in the event the property becomes vacant. In some cases, if your rental property is vacant for longer than 30 days, you’ll need additional coverage or a separate policy.
  • Coverage for an unlimited number of structures in the same state under the same policy, where necessary. This will be especially important to you if you have several rental units. Covering all of them together makes the most sense. 

Something to consider is your property value. Home values change frequently, and so do the costs of repairs and replacements. Lately, people have found that their properties are worth more, and that’s great news, but it also means it would cost more to replace those properties. You’ll need enough coverage to ensure you’re able to pay for all the work that will make your investment whole again. Review the amounts on an annual basis with your insurance agent. 

Looking for Loss of Rent Coverage

Invest in a landlord policy that includes coverage for loss of rent. If there’s a covered loss that your insurance will cover, the loss of rental income will also be reimbursed. This is protection in case your property becomes temporarily inhabitable. 

By including loss of rent coverage in your landlord insurance policy, you can mitigate the risk of financial strain caused by unexpected rental income loss. It is important to keep in mind that policies and coverage vary, and it’s best to consult with a knowledgeable insurance agent to understand all of the details and limitations of a policy that offers loss of rent coverage.

Liability and Los Angeles Landlord Insurance

Liability is a big reason to have adequate insurance coverage. There’s a lot of liability in renting out properties, and you want as much coverage as possible. If you are found to be responsible for property damage or bodily injury to your tenants, your insurance policy will cover those costs. Medical bills will be covered as well as any lost wages in some circumstances, depending on the policy you buy.

Having a landlord insurance policy with maximum liability coverage can go a long way toward giving you the peace of mind that comes with knowing you have a safety net in place, just in case something happens that leaves you responsible. There could be an accident that was outside of your control, but if a lawsuit is filed, you’ll be relieved you have liability insurance.

Earthquake Insurance and Los Angeles County Rental Homes

No one likes to even say the word “earthquake” in California, but they’re an absolute reality and a threat that we never see coming. You need to know what kind of coverage is available, and what it can actually do for you.

If there’s fire damage to your rental property that’s caused by an earthquake, your landlord policy is required to cover it. However, other damage to your home from an earthquake is not covered by your landlord policy. 

What may come as a surprise to you is that in California, one of the most earthquake-prone states in the country, earthquake coverage is not required. It is, however, probably a good idea for rental property owners. 

Earthquake coverage can provide some security, especially if you own a building with several units. There’s always potential for earthquake damage, and if it’s major damage, tenants will need to move out while repairs are made. You’ll have to rebuild, and you want to know there’s insurance in place to help you do that. 

In California, we are often dealing with drought. This recent winter, however, has been extremely wet and very dangerous. The flood risk is real, and a lot of experts predict that, unfortunately, the risk is only likely to grow. 

Flood Insurance in California 

Like earthquake insurance, flood insurance is not legally required in California, but your lender might want you to buy it before they’re willing to give you a mortgage. This includes any loan you’re hoping to procure for rental properties. 

You have two options when it comes to flood insurance: a private insurer; or, you can buy flood insurance through the National Flood Insurance Program (NFIP. The amount you spend on this type of insurance depends on a number of things, including:

  • Your rental home’s location. If you’re in a floodplain, your costs for flood insurance will be higher.
  • Your property’s elevation and the risk posed by rising waters.
  • The age of your property.
  • The building materials used to construct your home.

Most rental property owners can find a flood policy that’s at or under $1,000 per year, but deductibles can be as high as $10,000. The availability and affordability of flood insurance is also likely to change if we continue to have hard rains. Prepare for this as you’re budgeting for your insurance costs.

The Difference Between Water Damage and Floods (and how they’re covered)

Flooding is different than water damage. Insurance companies treat each of those events differently.

You may find some water damage at your rental home that’s due to a leaky pipe or a failing water heater. Those losses are covered by your landlord policy. Some types of water damage, however, will not be covered, and you will want to talk with your agent about buying additional endorsements to cover these potential problems. 

Any water damage that’s caused by a flood would have to be covered by your flood insurance policy. 

What about the sewer or a drain outside that potentially backs up into your property? 

Some landlord policies will cover such an event but others will not. You can purchase an extra coverage endorsement for this specific risk. If you don’t purchase it and water comes into your home through an outside sewer or a drain, your insurance policy won’t cover the repairs required to remediate that damage. That’s an expensive fix.

Beware of gradual water damage too, because that will not be covered by your landlord policy. It won’t be covered by your flood policy, either. If your rental property has a pipe that has burst and the damage is immediate, you’ll be covered. But, if you have a slow leak that goes unnoticed and the claim is not filed, this does not count as a sudden or accidental loss. So, you’re out of luck. 

Requiring Renter’s Insurance from Your Los Angeles Tenants

Protects YouWe always urge landlords to require renter’s insurance. Renter’s insurance protects you, it protects your property, and most importantly – it protects your tenants. These policies are typically inexpensive, and they ensure your tenant does not have to worry about paying out of pocket to replace their belongings or cover the costs of damage they cause in your home. 

Add the requirement to your lease agreement so tenants understand that it’s expected. You can ask for proof of coverage and you can also ask to be added as an additional insured. This doesn’t mean anything, really, except that you’ll know when policy terms change or it’s renewed or canceled. 

If you’d like to talk more about insurance, we’d welcome the conversation. Please contact us at El Camino Property Management. 

Please note this information is deemed reliable, but not guaranteed. Please consult appropriate professionals for specific situations.

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