As a Los Angeles property owner, your rental represents a major investment of both time and money. While it’s natural to be concerned about the potential risks involved in owning and managing an income-generating property, there is one step you can take toward protecting your investment that’s pretty easy: rental property insurance.
Having the right policy in place will give you peace of mind when confronting common landlord liabilities, such as vandalism, water damage, and tenant lawsuits. When you know you’re protected by a strong insurance policy, you can focus your energy on growing your portfolio and providing a great rental experience to your tenants.
We’ve got some specific tips for obtaining and selecting adequate coverage that safeguards your LA real estate investments.
Los Angeles Landlord Insurance Policies
The policy you buy for your rental properties will cover your physical investment property and the liability that you take on as a landlord.
Here are the three main things that nearly every Los Angeles landlord insurance policy will cover:
1. The actual structure of your property, or the dwelling.
Your rental property as a building is protected against perils such as fire, wind, hail, or structural collapse. Any of the property inside the rental home that belongs to you will also be covered. Appliances, for example, would be repaired or replaced during a covered loss.
2. Loss of rent due to a covered peril.
You’ll need a landlord policy that includes coverage for loss of rent. If there’s an unexpected event or damage that your insurance will pay for and your tenants need to move out during the repair process, your lost rental income will also be reimbursed.
3. Liability.
Liability protection is essential, as renting out a property is pretty risky. If you are liable 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.
You may be wondering what a typical landlord policy doesn’t cover. It doesn’t cover tenant possessions. Those things will require a separate renter’s insurance policy, and you should require renter’s insurance from your residents. Your policy also won’t cover floods or earthquakes.
Earthquake Insurance for Los Angeles Rental Homes
As we said, your Los Angeles rental property insurance won’t cover earthquake damage. This is a problem for Los Angeles real estate investors because we’re located in a high-risk area for earthquakes. You want to protect yourself and your property against the unthinkable.
One thing that is covered is fire damage. When your rental property is impacted by an earthquake and a fire starts, your policy is required to cover the fire damage. However, other damage to your investment property that occurs from an earthquake is not covered by your property policy. Ironically, California law does not even require earthquake insurance. It’s optional (and recommended).
If the big one hits, you’ll be glad you have the coverage. If you own a building with several units, you’ll be looking at a lot of damage to a lot of separate income streams. Even a minor earthquake can cause some damage, and if we’re unlucky enough to have a major quake, you’ll likely have to move your residents out while you make the necessary repairs.
Flood Insurance in California
Your property insurance will cover damage that’s caused by an internal and immediate flood (a leaky pipe or a sewer backup), but flood damage due to heavy rains or an El Nino event are not covered by your general policy.
Like earthquake insurance, flood insurance is not legally required in California, but you should consider buying a policy especially if your rental property is located close to water. Usually, your mortgage company will require flood coverage even if the state does not require it.
You have a couple of options when deciding where to buy flood insurance. One option is to go through the National Flood Insurance Program (NFIP), and another option is to look for plans available through private insurers. The amount you spend on this type of insurance depends on a number of things, including:
- Your Los Angeles investment 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.
Talk to a smart insurance agent and take your time looking around at different policies. We’ve had a number of insurers stop protecting homes in California, so you may find your options are more limited now than the last time you investigated flood insurance.
What to Know about Fire Insurance
Fires are a real concern, not only in rental properties generally, but in California specifically. We have had some unpredictable wildfires, and you want to make sure your investment is protected against any type of potential fire.
When a fire originates inside the home because of electrical wiring, an appliance, or a kitchen disaster, your dwelling insurance or your tenant’s renter’s insurance policy will most likely cover the damage.
A natural disaster, however, is different. If a fire begins because of an earthquake, you’re covered. If a wildfire burns down your building or your rental home, you’ll need to have extra protection in place if you don’t want to lose everything. Buy basic California fire coverage, and if you cannot find it through your existing insurance carrier, look into the FAIR plan, which provides basic fire insurance to high-risk properties, even if your regular carrier will not.
Renter’s Insurance to Protect Los Angeles Tenants
We’ve talked about the insurance that you and your property need. Now, let’s think about your tenants. Renter’s insurance has become quite common over the last ten years, and that’s because tenants’ possessions have grown in value.
As Los Angeles property managers, we recommend that you require renter’s insurance from your residents. Your lease agreement should ask for proof of insurance before they move into your rental property. This provides an important extra layer of protection for you, your residents, and your property.
These policies are often inexpensive, and your tenants need to understand that your insurance won’t cover them if their electronics are damaged in a flood or they’re responsible for a fire in the kitchen. Not only does the insurance cover their personal possessions in case of loss, it also covers your resident’s own liability should anything go wrong at the property.
As a Los Angeles real estate investor, it’s your responsibility to protect yourself and your investment against unforeseen events. There are many ways to do this, and a good insurance policy is the best place to start.
You can also partner with a property manager in Los Angeles who will prioritize protecting your investment and ensuring your tenants are accountable to the lease agreement. We can be that partner. Contact our team at Earnest Homes, and we’ll talk about insurance and other ways that we protect the value and condition of your asset.
