Landlord insurance works to protect rental properties from damage and liability claims, and it can cover lost rental income too. It’s actually quite different from standard homeowners insurance in a few big ways. San Diego makes this even more complex because the median property value here is now over $800,000. The wildfire dangers have also changed how insurers view our market.
Most standard policies will cover fires, theft and vandalism. The problem is that San Diego landlords are dealing with a whole new reality now. State Farm just dropped 2,293 local policies in 2024 alone. Nearly 750,000 properties throughout the county either had their premiums spike or were dropped because of extreme weather dangers. Properties out in East County are having trouble even finding an insurance company that will write them a policy at any price.
Liability is another big concern here since jury verdicts for habitability claims can run $1 million or more. Tenants could cause thousands of dollars in damage to your property. You could be looking at wrongful eviction claims even if you do everything right. A person could slip and fall on your property and sue you for everything. The minimum coverage that most landlords carry won’t come close to protecting you from these kinds of losses. Then there’s the rental income that you’ll lose if wildfires damage your property and the repairs take months to finish. Most landlords have no idea just how big the gap is between what they think their policy covers and what it’ll actually pay out.
We need to look at what landlord insurance covers in San Diego and find out where you’re going to want more protection.
Here’s what landlord insurance actually covers for your San Diego rental property!
The Basic Property Coverage You Get
Most landlords have this idea that their normal homeowner’s policy is going to cover their rental property just fine – it’s actually a pretty big mistake because rental properties are business investments. They face different problems than a home that you live in yourself.
The standard coverage does cover most of the typical hazards. Pacific storms roll through every winter and cause damage to roofs and siding. Vandalism is another big one that happens often. Sometimes it’s between tenants or maybe after a messy eviction goes south. Theft is also covered, and this usually means appliances or copper pipes, as the property sits empty for a while. Fire damage is covered, too, and wildfire protection is actually something that we should talk about separately because it’s become so important.
Your policy has to cover all kinds of weird situations that normal homeowners never even have to worry about. Let me give you a perfect example. Your tenant decides to take a two-week vacation in December and somehow forgets to leave the heat on before they go. The pipes freeze and then burst as they’re away on their trip. The water damage ruins everything in the house. A normal homeowner’s insurance policy probably wouldn’t help you at all in this situation. Landlord insurance should actually cover this entire mess, though.
The deductibles are set up differently, too. Wind damage might only cost you $1,000 out of pocket, but earthquake coverage could have a $5,000 deductible instead. Every kind of claim has its own deductible amount, and you need to know these numbers ahead of time.
Landlords always make the same expensive mistake with replacement costs. They’ll go ahead and insure their property for $400,000 when rebuilding it today would run them $550,000 or more. Construction costs in San Diego have gone crazy in the last few years. Labor is a lot more expensive now. Materials cost a fortune compared to what they used to cost.
Natural Disaster Insurance for San Diego Landlords
San Diego landlords have to deal with some pretty specific insurance problems that landlords in other cities just don’t usually face. Insurers now use very comprehensive wildfire danger maps when they decide whether to insure a property. Properties in East County or anywhere near the canyon areas have become much harder to insure over the past few years. A few big insurers have pulled out of these neighborhoods and won’t write any new policies there at all. The ones that do still offer coverage in these areas will usually need to see proof that you’ve created defensible space around the property first.
The Santa Ana winds are another big insurance concern that’s pretty specific to our area. The Bay Area and LA landlords don’t usually have to worry about this particular issue. These winds are very strong and can tear the roof tiles right off or send outdoor furniture straight through your tenant’s windows. Wind damage is usually included in most standard policies, and that’s the positive side. The bad news is that the deductible amounts can be different from one policy to another.
Location is probably the biggest factor in determining your insurance costs as a San Diego landlord. I’ve seen identical rental properties where one costs 3x as much to insure as the other just because of the neighborhood. A property in Scripps Ranch could cost triple what you’d pay to insure the exact same square footage downtown. The price difference usually comes from the wildfire exposure and your proximity to open space.
One massive coverage gap that many landlords overlook is earthquake damage. Standard landlord insurance policies don’t include earthquake coverage at all. You actually have to buy a separate earthquake policy if you want that protection. These earthquake insurance options deserve more attention. But for now, remember that standard landlord insurance won’t help you if an earthquake damages your property.
Personal Injury Claims at Your Property
Your property can handle earthquakes and fires just fine. The real problem comes when a person gets hurt on your premises, and that’s where liability coverage becomes essential for any landlord who wants to protect their assets.
A tenant walks out of your building one morning and slips on a wet walkway, and suddenly, they’ve broken their hip. Or maybe a guest who’s just there to visit one of your tenants gets bitten by another resident’s dog in the hallway. San Diego juries regularly hand out awards that exceed $1 million in personal injury cases, and that means your insurance coverage could leave you exposed to significant financial danger.
California has some of the strictest habitability laws in the entire country. A tenant could claim that you didn’t keep the place safe enough for them to live in. Before you know it, you’re looking at a massive lawsuit even though you did everything by the book. Medical payment coverage actually helps here because it covers minor injuries without anyone having to prove fault.
Legal defense costs alone have the power to destroy your financial stability. Even if you win your case, attorney fees in San Diego can easily reach six figures before everything finishes. Your liability coverage should pay for your legal defense costs, but you need to look at the fine print closely to make sure this protection exists.
Most landlords have no idea that standard policies won’t cover discrimination claims at all. Anyone who accuses you of Fair Housing Act violations will probably leave you paying for your own defense unless you’ve specifically purchased particular coverage for these types of claims.
Properties with pools or older buildings with original staircases need much more liability coverage than your average rental property. These features make it more likely that somebody could get badly hurt on your property. You’ll also want to know the difference between per-occurrence limits and aggregate limits when you’re shopping for a policy. Per-occurrence coverage takes care of each incident separately and gives you fresh coverage each time something happens. Aggregate limits put a hard ceiling on what your insurance company will pay out for the entire year, no matter how frequently you file claims.
Coverage That Protects Your Rental Income
Your rental property could be unlivable after a wildfire. But that mortgage payment is still due every month. Loss of rent coverage can save you from financial disaster here. The right policy will maintain replacement income flowing into your account as you’re waiting for the repairs and the rebuilding to get done.
San Diego landlords usually receive anywhere from $2000 to $4000 per month in rent, and the loss of that income for even just a couple of months can destroy your finances. Most insurance policies will cover somewhere between 6 and 12 months of lost rental income. The problem is that wildfire repairs usually take way longer than that because every property owner in the area needs the same contractors and construction crews all at once after a big fire sweeps through.
There’s a big distinction between loss of use coverage and loss of rents that every landlord needs to know about. The first type only pays you based on the exact amount that you were collecting from your tenants before the disaster. The second type pays you based on the fair market rental value of your property at the time of the loss. That distinction can be worth thousands of dollars when you file your claim, so you need to know which one your policy includes.
Civil authorities sometimes force evacuations or block access to properties for weeks or months at a time. You can, fortunately, still file a claim for lost rent when this happens. The same protection also applies if utility failures make your property unlivable.
Documentation matters before anything bad happens to your property. You should maintain records of what you charge for rent today. Take photos of all your lease agreements and your monthly bank deposits. Insurance adjusters are going to demand solid proof of your rental income when you file that claim. They won’t accept whatever number you tell them that your property was worth.
Some policies include money to help relocate tenants after a fire or other disaster. But plenty of other policies won’t cover a single penny of these relocation costs. San Diego’s rental market is already very tight and expensive, so tenant relocation costs can pile up fast. Pull out your policy documents and check what yours covers while you still have time.
Optional Add-On Coverage for Your Property
San Diego landlords have quite a bit more to think about for insurance coverage on top of the standard policy requirements. Earthquake insurance is probably the extra coverage most worth reviewing, and it’s available through the California Earthquake Authority. The deductibles are actually pretty high, though, and usually run anywhere from 10% to 15% of your total property value. For an $800,000 rental property in San Diego (which is pretty common for the area), you’d be looking at an $80,000 deductible. That means you’d have to pay $80,000 out of pocket before your insurance would even start to help.
The San Andreas Fault is close enough to San Diego that earthquake coverage definitely deserves careful consideration. Big earthquakes are rare in the area, but the damage can be devastating when one does hit. Every landlord has to weigh the cost of the premiums against their own financial situation and how much uncertainty they’re comfortable with.
An umbrella policy is also worth a close look for most San Diego landlords. These policies only cost a few hundred dollars per year, and they provide millions of dollars in extra liability protection on top of what your standard insurance covers. San Diego sees more than its share of legal disputes, and property values are high enough that standard coverage might leave you exposed. A tenant or visitor who gets a bad injury on your property might sue for more than what your standard policy covers.
Certain parts of San Diego need even more particular coverage. Properties that are in or near Mission Valley face real flood danger, and standard landlord insurance doesn’t include flood protection at all. You’d need a separate flood policy for any rental in these flood-vulnerable zones. Older properties have their own concerns, too. Ordinance or law coverage matters quite a bit because it covers the cost of bringing your property up to meet the latest building codes after you’ve had damage from a covered event. These code upgrades can be expensive, and without this coverage, every dollar comes straight out of your pocket.
Coverage Gaps in Your Policy
The line between regular maintenance problems and sudden accidental damage also causes plenty of confusion for property owners. Your insurance company will certainly pay to repair a roof that collapses during a heavy windstorm. But that exact same roof collapse won’t be covered when it happens because you’ve ignored deteriorating shingles for the past decade. Insurance providers expect you to take care of your property, and they won’t pay for the damage that results from years of neglect or deferred maintenance.
California has become notorious for expensive legal cases related to bed bugs and mold problems. It’s why almost every insurance company in the state now excludes them from standard policies. These exclusions became the industry standard after a few landlords got hit with massive court judgments. Protection against bed bug or mold claims will probably require you to buy a separate policy for that coverage.
Your insurance might also leave you hanging when a tenant deliberately damages your rental property. Security deposits become very important for this exact reason. Your standard policy will cover accidents and random vandalism from strangers. But it won’t cover intentional destruction by a person that you actually gave keys to.
Empty rental properties present yet another coverage gap. Most insurance policies either cut down on your coverage quite a bit or get rid of it after your property has stayed vacant for 30 to 60 days. San Diego has tons of military families who move in and out all of the time. Rental properties near the bases frequently sit empty between tenants. You need to notify your insurance company about any extended vacancy periods, or you might find yourself with zero coverage right when something goes wrong!
Maximize Your San Diego Rental Property
Insurance paperwork can pile up fast, and San Diego property owners face a tough combination of challenges. We have those intense Santa Ana winds that can turn a small spark into a serious wildfire in hours. Earthquakes are always a possibility – even though most of the country never thinks about them. Property values here have gone through the roof, and rental rates have followed right along with them. Because of all this, the right insurance coverage gets harder to figure out and more important than it would be almost anywhere else.
Your policy from a few years ago might not cut it anymore. Property values have gone up a lot since 2019, so what used to be adequate coverage could leave you seriously exposed now. Property owners should save lots of photos and documentation of their property’s condition because you never know when something might happen. The worst time to hunt for proof is right after an incident when you’re already stressed and managing the damage. Replacement cost estimates feel like busy work until the day that you actually need them. Nobody wants to discover that they’re underinsured at the exact time they need to file a claim.
Decent coverage costs money, and each premium payment feels painful every time you write the check. One uncovered incident could cost 10 times what you’d pay for the right protection, though. Maybe you’re running your first rental property, or maybe you’ve been growing your portfolio for years. Either way, you need to know exactly what your insurance covers and what it leaves out. You’ve put in the work to build your investment, and the right protection just makes solid business sense.
Palm Tree Properties sees every day how the right management strategy changes everything for property owners. We’ve been helping San Diego landlords manage tenant screening and maintenance coordination for years. We also help with insurance claims when they pop up. Our team treats your investment property with the same care that we’d give our own, and we’d love to show you just what that means. A free rental analysis will show you what your property could actually be earning in the market. You can review our management services to see how we take the stress out of being a landlord.
