Rentals provide a great vehicle to generate passive income, but California property owners might kiss their investments goodbye without the proper landlord insurance.
Hypothetically, let’s pretend a fire, flood, theft, or other unfortunate event damages your rental. If you think homeowners or renters insurance will cover your expenses, think again. Landlord insurance is the only way to protect your rental property from such catastrophes.
To help you further understand landlord insurance, this guide will cover:
- What landlord insurance covers and why it’s essential
- The typical cost of landlord insurance
- Different tiers of landlord insurance (and common add-ons)
- The best landlord insurance companies
- How to use software to protect your rental
California Landlord Insurance: What it Covers and Why it’s Essential
In short, landlord insurance protects against financial losses from property damage, legal fees from injuries on an owner’s property, loss of rental income due to a covered event, and more policy-specific occurrences.
Property owners who want to protect their rentals can only do so by investing in landlord insurance. Homeowners insurance applies only to one’s primary residence (but not to their rental properties). Rental insurance protects a renter’s possessions (but not the actual rental property itself).
Natural disasters, vandalism, theft, and other common events affecting rentals are unpredictable and out of a landlord’s control. The proper insurance policy will protect against these unforeseen events and compensate property owners when their investments are damaged, stolen, or destroyed.
Typical Cost of Landlord Insurance in California
Average costs for California landlord insurance range from $896 to $1,728 a year. Where a landlord can expect to fall within this spectrum depends on the value of their property, which insurance company they choose, and what level of coverage they enroll in.
To reiterate, landlord insurance doesn’t cover any of the renter’s possessions. If renters want to ensure that everything under their roof is insured, they should opt for renters insurance, which typically costs between $148 and $187 annually.
The Three Types of Landlord Insurance Policies
There are three tiers of landlord insurance. Here’s what to expect from each:
- DP1 is the most basic coverage for rentals. It covers nine perils (fire, lightning, explosions, etc.) but does not cover losses or damages caused by theft or vandalism. It’s a budget-friendly option but leaves landlords vulnerable.
- DP2 is a mid-level policy. Unlike DP1, it covers fire, theft, vandalism, freezing pipes, and more. It typically replaces property at its current value (not its depreciated value like DP1). DP2 insurance strikes a balance between affordability and coverage.
- DP3 is the most comprehensive landlord insurance. It encompasses virtually all damage-causing perils with a few exceptions (floods, earthquakes, etc.) and covers replacement costs for rebuilding your rental property. DP3 is high-end coverage at a premium price.
Optional Add-Ons Not Typically Covered in Standard Plans
Even the most comprehensive coverages don’t cover certain events. Here are a few typical add-ons you can bolt onto your insurance policy to round out your coverage:
- Flood insurance: Not usually included in typical policies, including DP3, and only protects against floods caused by natural disasters (not plumbing).
- Earthquake coverage: We only recommend purchasing this add-on if your rental is within an earthquake-prone part of California.
- Malicious damage by tenant: This covers intentional property damage caused by the tenant, which wouldn’t qualify as vandalism.
- Rent guarantee insurance: Compensates landlords for unpaid rent if their tenants break a lease, get evicted, or don’t pay rent.
Best Landlord Insurance Companies in California
If you’re a landlord searching for an insurance policy to protect your California rentals, look no further than these four widely-trusted companies:
Steadily
We recommend Steadily landlord insurance above all other options on the market. With a 4.5-star rating on Trustpilot, Steadily comes highly recommended by thousands of happy customers.
Pros
- They’re a landlord-insurance-only company and laser-focused on the industry
- Highly customizable policies and competitive rates
- Offer a personal touch many big box companies can’t match
Cons
- Bundling with other policies isn’t an option
Obie
Founded in 2017, Obie Insurance hasn’t been around for long, but they’ve quickly made a name for themselves by offering affordable policies in all 50 states.
Pros
- Like Steadily, they specialize in landlord insurance
- Competitive quotes are available within seconds
Cons
- They’re a very new company without much of a track record
- Online only, no in-person agents as of yet
State Farm
If you’re looking for affordable landlord insurance from a trusted authority, consider State Farm (especially if you want to bundle it with car, homeowners, or other types of insurance).
Pros
- Well-established (founded in 1922) and widely-used
- Customers can bundle with other types of policies
Cons
- Spotty online reviews
- On the higher end of the price spectrum
Farmers
Much like State Farm, Farmers Insurance is a widely-used powerhouse landlord insurance provider that allows for bundling with other types of insurance policies.
Pros
- SmartMove feature helps landlords screen potential tenants for an added cost
- Highly customizable policies with options for add-ons
Cons
- Online reviews leave a lot to be desired
- One of the more expensive options available
How TurboTenant Can Help
We don’t offer landlord insurance at TurboTenant, but we do offer landlords a highly streamlined property management experience through our free, easy-to-use software.
Here are a few ways TurboTenant can help you better manage your rentals:
- Collect in-app rental applications
- Screen potential tenants with confidence
- Generate rock-solid lease agreements
- Collect rent payments digitally
- Stay on top of your accounting
Sign up for TurboTenant today to take your property management experience to the next level.
California Landlord Insurance FAQs
Can a landlord require renters insurance in California?
Yes. Though renters insurance isn’t required by law, landlords can require tenants to sign up for a policy in their lease agreements.
Are landlords required to have insurance in California?
No, landlord insurance isn’t legally required in California, though we highly recommend it.
Does homeowners insurance cover rental property in California?
No, homeowners insurance only applies to owner-occupied homes. If you want to cover your rental, you’ll need landlord insurance.
Can I deduct homeowners insurance on my rental property?
No, you can’t deduct homeowners insurance on your rental property in California. Homeowners insurance only applies to your primary residence, and its premiums aren’t tax-deductible.
You can, however, deduct the premiums you pay for landlord insurance, which is considered a business expense for property owners using rentals to generate income.
