Real estate investing is especially challenging and especially risky in an expensive, high-demand market like San Francisco, CA. To make things more complicated, a number of insurers are pulling out of California entirely, leaving homeowners with fewer options on how to protect their investments. This creates higher costs. 

As property managers, helping our investors to protect their properties is a priority. Let’s talk about protecting yourself and your investment with the right insurance options and how to navigate increasing requirements from insurance inspectors who want to see upgrades and improvements in buildings before they issue a policy. 

San Francisco Rental Property Insurance: A Brief Overview

Before we dive into the new complications around insurance facing San Francisco investment property owners, let’s outline what we mean when we talk about insurance. Rental property insurance, which is often referred to as landlord insurance, is designed to cover the unique risks associated with renting out property. Policies generally include coverage for the following:

  • Property damage: This coverage includes damage to the building from fire, storms, vandalism, and more. If a pipe bursts and floods your property, repairs and replacements are covered. 
  • Liability protection: If someone is injured on your property, liability protection can help cover legal fees and medical expenses. Your tenant or your tenant’s guest may trip on some stairs. You’ll need your liability insurance to defend yourself against the likely lawsuit.
  • Loss of income: If your rental property becomes uninhabitable due to covered damages, this insurance can cover lost rental income. You may need to relocate your tenant during a major repair. 

Given San Francisco’s property values and rental prices, you don’t want to be cheap when it comes to insurance. This has to be a critical aspect of your investment strategy.

When considering rental property insurance in San Francisco, it’s crucial to evaluate your specific circumstances. You’ll want to consider the type of property you have as well as its age and condition. Historically, you want to think about your financial position, and how prepared you are to absorb risks. 

Understanding the potential for local hazards, such as earthquakes, will also help you decide what kind of insurance to buy. For example, earthquake insurance is not legally required, and your regular policy does not cover earthquakes. Would you be able to recover financially if an earthquake damaged your building or your property?

Challenges in Finding Insurance in San Francisco

In May of 2023, State Farm announced it would no longer issue new insurance policies to California homeowners due to “historic increases in construction costs outpacing inflation, rapidly growing catastrophe exposure and a challenging reinsurance market.” (Kiplingers, 2023). Allstate soon followed and since then, four additional insurers have stopped issuing new insurance policies for homes and properties. 

The cost of insurance has gone up an average of nearly 10 percent in the last year, making it far less cost-effective to insure your property. There are fewer companies willing to insure your property, and extra bureaucracy involved in getting that policy. 

Insurance inspections have typically been part of the process of getting a new policy, and they’re designed to evaluate roofing, electrical, plumbing, and HVAC performance. Lately, there have been new requirements showing up, specifically from insurance inspectors who want to see plumbing and electrical upgrades, especially in older properties. Some property owners have reported that they’ve been required to upgrade their waste and sewer fixtures. 

Contact Property ManagementIf you’d like to talk about insurance or risks or the best ways to protect yourself, please contact us at Gordon Property Management. We’re experts in San Francisco property management, and we can take a look at where you might be able to better protect your investments