Navigating Property Insurance in California: 10 Essential Insights

Last Updated: April 30, 2024By

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California’s leading insurer, State Farm, has announced its decision to cease coverage for 72,000 apartments and homes starting this summer. This action is poised to escalate the cost of insurance for affected apartment owners at a time when more cities are implementing more restrictive regulations on rent increases. In the ever-evolving realm of property insurance in California, where insurance companies are exiting and rates are on the rise, it’s crucial to be well-informed. Here are ten essential considerations to help ensure the continuity of coverage and minimize premium costs.

  1. Strategic Claims Management: Avoid making minor insurance claims to prevent potential repercussions. A seemingly innocuous $5,000 claim could escalate your premium to $20,000 the following year or, worse, lead to termination of coverage.
  2. Optimize Premiums and Deductibles: Since small claims are off the table, consider opting for lower premium payments coupled with higher deductibles to save on costs in the long run.
  3. Payment Efficiency Matters: Enroll in auto payments or pay in full to avoid potential policy reinstatement issues arising from late payments, a factor that carriers may not be lenient about.
  4. Caution in Shopping Around: While exploring insurance options, be mindful of potential pitfalls. Underwriting for new policies is evolving rapidly, and qualification guidelines may demand updates to costly elements like roofs, electrical systems, heating, and plumbing.
  5. Timely Policy Transition: If purchasing a new property or seeking a new policy, initiate the process at least 30 days ahead. Ensure the new policy is effective and all underwriting is completed before canceling the old policy.
  6. Location Impact on Costs: Properties in proximity to mountains, brush, or rural areas may incur 2-3 times higher costs and have more limited coverage due to increased risk factors.
  7. Inquiry Impact on Claims History: Merely inquiring about coverage can create a claim history, even if no claim is filed. For example if you call your insurance company to seek information about what the coverage is for a leaky roof, even if you decide not to make an insurance claim, the inquiry in and of itself could impact your coverage. Be cautious when seeking information, as these inquiries may impact your future insurance rates.
  8. Individualized Claim Tracking: Claims typically follow individuals, not just properties. If you make a claim on a property and then sell it, be advised that the claim can affect your insurance rates when purchasing your next property.
  9. AI Integration in Underwriting: Insurance companies leverage AI, incorporating tools from companies like Zesty and Esri to gain hyperlocal risk insights. Aerial images are used to assess roof conditions, proximity of foliage or trees, fire hazards, and other risk factors.
  10. Electrical Panel Considerations: When buying or selling an apartment building, be aware that insurance requirements may necessitate replacing electrical panels. Panels from Zinsco or Federal Pacific, which are commonly found in apartment buildings, are known fire hazards and can be costly to replace.

In navigating the ever-evolving landscape of insurance underwriting, staying well-informed is crucial. When it comes to purchasing a property, moving away from the conventional approach of securing insurance merely a week before closing is no longer advisable and allocating a minimum of 30 days for policy acquisition is now essential. When helping my clients buy or sell a property, I’ve found that collaborating with seasoned insurance professionals specializing in multifamily properties can prove to be invaluable. These professionals possess a nuanced understanding of the complexities unique to apartment buildings, offering a strategic advantage in navigating potential challenges. As you safeguard your property investments in California’s dynamic insurance market, having access to such expertise can make a significant difference in ensuring a smooth and secure transaction.

WRITTEN BY Mercedes Shaffer, Realtor

If you have questions about buying, selling or doing a 1031 exchange, CONTACT ME. I can be reached at 714.330.9999,, or you can visit my website at  I’m Mercedes Shaffer, a multifamily real estate agent with Coldwell Banker, helping you build wealth one door at a time. DRE 02114448.



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