California Home Insurance in 2023

Key Points

• The average cost of homeowners insurance in California is $4-$7 per $1,000 of the insured home's value annually, but the rates are starting to go up by as much as 40 percent annually.
• The coverage limit you obtain for home insurance should be sufficient to cover the cost of replacing or repairing damages.
• The California Department of Insurance approves insurance rates and licenses insurance companies.
• Home insurance is not mandated by law but is required by mortgage lenders and landlords.
• Different types of residential insurance in California include homeowners insurance, condo insurance, landlord insurance, and renters insurance.
• Property coverage provides compensation for damages to buildings and belongings caused by covered perils, while Liability coverage protects against legal actions involving injuries or property damage to third parties.
• Home insurance policies can be based on actual cash value (ACV) or replacement cost value (RCV), which affect the reimbursement for damages.
• The California FAIR Plan provides coverage for high-risk renters and homeowners who can't find coverage from private insurers.
• It is recommended to consult a licensed property and casualty insurance agent to evaluate home insurance requirements and compare quotes.

Overview of Residential Insurance in California

Home insurance protects owners and tenants of residential dwellings from financial losses caused by specific risks, including vandalism, fire, lightning, hail, explosion, and theft. An insured residential property is typically a rented apartment, condominium, single-family home, mobile home, or multi-family home.
Homeowners insurance in California typically costs $4-$7 per $1,000 of the insured home’s value annually, depending on the additional selected coverages. Landlord’s insurance is 10%-15% higher than homeowners insurance. Renters insurance is typically $10-$20 per month, per $30,000 of personal property and $100,000 of personal liability coverage.

Apart from providing coverage for physical damages, residential insurance offers personal liability coverage in a situation where a guest holds the homeowner responsible for injuries suffered while on the property. A California home insurance policy covers the medical expenses and legal fees of injured guests visiting the property. Furthermore, a policyholder can get a payout for additional living expenses if their insured home is damaged, making it uninhabitable for some time.
The cost of residential property insurance in California is determined by various factors, including region, nearest emergency department, building age and construction, deductible, discount, and the scope of insurance coverage purchased. The insurance rate for home owners varies from one provider to another. It is always best to contact a licensed property & casualty agent in California when shopping for home insurance.
Generally, the California Department of Insurance (CDI) is tasked with approving insurance rates according to 10 California Code Regulations § 2641.1. The state agency is also in charge of licensing insurance companies and agencies. You can use CDI’s online premium comparison tool, which encompasses more than 90% of the California residential insurance market. Policyholders can file complaints against an insurance agent or company online or by calling the CDI Hotline at 1 (800) 927-4357.

Why Do We Need Home Insurance in California?

California residents need home insurance to avoid making out-of-pocket payments when their properties and belongings suffer unexpected damages. There are more than 14 million housing units in California, and 55% are owner-occupied. California homes are often exposed to common unexpected perils like theft, vandalism, and natural disasters. Recently, the California Attorney General announced that the state experienced a 3% surge in property crime between 2020 and 2021. Wildfires and earthquakes are also common problems witnessed in the Golden State. In 2022, the California Department of Forestry and Fire Protection (CAL FIRE) reported 6,739 fire incidents, with 880 properties destroyed or damaged. Without cheap home insurance, residents will have to pay large sums out of their pockets to repair or replace damaged buildings.
Even worse, Californians face difficulties in finding insurers to cover their homes due to high real estate prices and the increasing threat of wildfires. In 2023, after proposing price hikes of 28-40 percent, State Farm and Allstate decided to stop accepting new applications for property and casualty coverage in California.
Residential property insurance is not mandated by law in California. However, if you have a mortgage on your house, insuring home from property damage becomes a must. Your mortgage lender will insist you get the minimum homeowners insurance coverage. In some instances, mortgage lenders may include property insurance as a loan prerequisite. In the event of an unforeseen loss, getting this protection safeguards the lender's ownership interest in the property. Note that your mortgage lender has the right to impose a force-placed home insurance policy and charge you for it if you have no homeowners insurance while the home is financed. If you rent out your residential property, you need home rental insurance to protect it, while a stranger lives there. If you rent a home or an apartment in California - chances are that the landlord will require renters coverage on your part.
Having a home insurance policy also gives you personal insurance coverage for liabilities. Most home insurance policies in California can help you pay for personal liability claims when someone suffers an injury in your permanent or temporary house. Examples of possible injuries to your guests while on your property include dog bites, slips, and accidental falls. With California property insurance, you can get medical expenses coverage for the injured person’s treatment. In addition, if the guest decides to sue you for personal injury, your insurance will cover legal fees, such as: court, deposition, investigation, and court reporter fees. In California, these fees often range between $2,000 and $4,000. If the guest wins the personal injury lawsuit, which often takes place in a small claims court, you may commonly pay up to $10,000 in damages, and frequently more. Fortunately, renters, homeowners, and landlords insurance policies come with personal liability coverage to cover these costs.
Landlord insurance (rental property insurance) covers tenant-related risks affecting the building structure and not the contents of the house, unless they are part of the rental property. It also protects against liabilities involving tenants and loss of rent. While landlords may mandate renters insurance as a risk management strategy, tenants can also benefit by avoiding out-of-pocket expenses for unanticipated insurable events.
Consult a knowledgeable P&C insurance agent in California who can evaluate your home insurance requirements based on where you live, the type of the dwelling you occupy , and its ownership status. The agent can answer your insurance questions, help you go over the coverage options, and compare home insurance quotes to identify the best home policy insurance plan that fits your needs.

How Does CA Home Insurance Work?

An individual who owns a house or condo, or rents an apartment in California can purchase relevant residential property insurance from a property and casualty insurance company. The California Department of Insurance licenses all Property and Casualty (P&C) insurers that want to offer home insurance policies to the residents of the state.
In order to buy home insurance, California residents typically use insurance agents to access any of the over 100 P&C insurance providers licensed in California. P&C insurance agents offer valuable information on how to find affordable home insurance policies. While some insurance agents are captive agents who exclusively represent one P&C insurance company, others are independent agents who can provide home insurance quotes from multiple competing insurers. Use the California Department of Insurance license lookup to verify if an insurance agent is licensed by the CDI.
If a resident cannot find home insurance coverage from private insurers, an insurance agent may recommend the California FAIR Plan property insurance coverage. The California FAIR Plan (CFP) is an insurance initiative that covers high-risk California renters and homeowners who may not be eligible for coverage from private insurers. Property insurance plans under the FAIR Plan are named peril policies, which means that your contract will only provide coverage for the types of perils listed there. Here are some of the perils included under the California FAIR Plan home insurance:

• Fire
• Internal explosion
• Lightning
• Vandalism
• Smoke
• Civil commotion and riots
• Windstorms and hail
• Volcanic eruptions
  Note that neither personal liability protection nor coverage for the replacement cost of a dwelling is included in FAIR Plan insurance. Some homeowners purchase California FAIR policies together with Difference in Conditions (DIC) policies. A DIC policy often increases coverage limits for named risks or to cover other perils. For instance, two major coverages excluded in the FAIR Plan, water damages and personal liability, may be available through a DIC policy.
  Once you find the right policy, the next step is paying the premium as agreed in the policy document available on the home insurance declaration page. Your property insurance premium is the money you regularly pay to maintain your insurance contract. Many insurers provide flexible payment alternatives, allowing you to pay your homeowners premiums monthly, quarterly, or annually. Mortgage lender typically adds homeowners insurance premium to your monthly mortgage payment; then pays the insurer each year from the accumulated amount.
  With active home insurance coverage, you can file an insurance claim with your insurer if your property suffers damages from a covered peril. P&C insurance companies in California can pay insurance claims thanks to the total direct premium written to policyholders. In 2021, homeowners' multiple peril coverages accounted for nearly $11 billion (12.87% of all) P&C premiums collected in California. Meanwhile, the losses for the underlying policies that year were less than half of the collected sum (under $5 billion).
  After property damage, home insurance policyholders must initiate the claim process by notifying their insurance companies. The insurer assesses the damage and determines if it is indeed a covered loss and what are the coverage limits for this type of loss according to the policy. The insurance adjuster pays out the claim based on the valuation of the property stated in the policy. If you purchased an ACV - actual cash value insurance, you will typically get a much lower payout than you would if you had a replacement cost value - RCV insurance claim.
  According to California’s Fair Claim Handling Regulations, your insurance company is required to do the following within 15 days:
• Confirm receiving the claimant's notice unless the claim payment is made within that time frame;
• Provide the claimant with the appropriate paperwork, guidance, and reasonable support. This should also include outlining the details of the proof of claim that must be submitted;
• Start any investigation or inquiry to validate the claim.
  In response to claims, insurers often send proof of loss forms to policyholders. The form is designed to give the insurer the necessary information to assess the scope of its responsibility. It is advisable to complete the form with the help of a knowledgeable P&C insurance agent. A CDI-licensed insurance agent can provide information on what is included and excluded in your California home insurance policy.

What Are the Types of Residential Insurance in California?

P&C insurers in California offer different types of residential property insurance coverages to suit different building types and ownership needs:

• Homeowners insurance for live-in owners, covering any residential property, other than a Condominium
• Condominium insurance - also known as walls in insurance, for owners of condos where the condominium association carries the master policy insurance on the building and common spaces and the tenants gets coverage on the unit itself,
• Landlords insurance on a rental property, and
• Renters insurance on a rental property
  The two main categories of California home insurance are:
• Property insurance
• Liability insurance
  Generally, every homeowner or renter needs insurance for home repairs in the event of unexpected damages brought on by covered perils. Liability insurance is also required to protect insureds from legal actions for personal injury or property damage they or family members cause to guests. Standard residential insurance should include both property insurance and liability insurance.

PROPERTY COVERAGE in California Residential Insurance

In California, property insurance offers financial compensation to policyholders whose buildings and belongings suffered losses due to covered perils like fire, theft, or vandalism. When buying property insurance, residents have various policy options to select from. The property's structure and the required coverage level will determine the necessary home policy insurance type. Some policyholders choose a home insurance policy with all-risk coverage, which offers protection against all perils except the ones specifically removed by the insured. On the other hand, property insurance with named perils coverage protects a building or personal property from financial losses caused by hazards or events listed on the policy document.
Read more in detail about the types of residential property insurance in California.

LIABILITY COVERAGE in California Residential Insurance

In California, homeowners, tenants, landlords, and mobile home owners can access residential personal liability insurance coverage. It protects against legal actions where the insured is held accountable for mishaps involving third parties while on their property. Liability coverage is frequently included in the most comprehensive property insurance plans. Liability insurance may be required in some circumstances, like when a guest is hurt on your residential property. This policy may cover the medical expenses, attorney costs, and other legal fees if the injured party needs medical care or chooses to sue you. In addition, your home insurance through personal liability coverage will cover cases where your pet harms someone or damages their property.
The Dog Bite Liability Claims report published by the Insurance Information Institute in 2021 reveals that P&C insurance companies in California paid over $120 million to cover 2,000+ dog bite injury claims. Note that liability insurance does not pay for the cost of treating injured or sick dogs; fortunately, pet insurance will cover that. Consult a California-licensed property and casualty insurance agent to understand what your residential property insurance includes and excludes.

California Homeowners Insurance vs. Condo Insurance: How Are They Different?

Both condo and homeowners insurance provide the owner with protection for their personal property, liability, and the interior of the building. Nevertheless, the two types of home insurance differ in how they approach protecting a building's structure. Generally, a homeowners insurance policy in California will cover the interior and outside of a property. On the other hand, Condo insurance exclusively covers the interior components of the owner's particular unit (referred to as Walls-In). Condo unit owners in a property complex join together to buy a condo association master policy. This policy, which pays for damages done to the external part of the building and common areas, often provides any of these two options:

• All-in coverage, which includes protection for your condo unit's internal fixtures, including carpets and fitted appliances
• Bare walls-in coverage, which does not cover anything inside your unit

How Much Home Insurance Do I Need in California?

You need adequate home coverage to cover the cost of replacing or repairing damages done to your building and personal possessions. Generally, California insurers offer residential property insurance policies based on actual cash value (ACV) or replacement cost value (RCV). Understanding ACV and RCV will help you choose the right coverage limit for your property insurance policy.
If your property insurance coverage is based on Actual Cash Value, the insurance company will reimburse you for replacing or repairing the damaged home or belongings after deducting depreciation from the total loss amount. For instance, if a fire destroys your 5-year-old television, your insurer will pay the cost of purchasing another TV, minus the depreciation caused by wear and tear from the previous 5 years. Depreciation is evaluated based on a property's lifespan. And so, if your 5-year-old TV has a 10-year lifespan, the ACV compensation would only be for half of the couch’s replacement cost.
Although the actual cash value is less expensive, the Replacement Cost Value offers better protection. If your property insurance is based on RCV coverage, your insurance provider will pay to repair or replace damaged buildings or personal possessions without subtracting depreciation. This means if your 7-year-old computer is destroyed in a fire, your home insurance policy will compensate you for a new, similar computer at the current price. After deciding between an RCV or ACV insurance policy, you can now choose a coverage amount for the six types of homeowners insurance coverage:

• Coverage A: This is the dwelling coverage, which provides financial protection for the property’s physical structure against unexpected named perils. You should consider getting a home insurance coverage limit that covers 100% of the replacement costs. The replacement cost should be evaluated based on the cost of construction supplies and labor. In California, the average cost of building a new home is $800,000, and the costs often vary based on construction cost, labor, and location. According to the 2022 Homeownership Value, the median price of single-family homes in different counties range between $300,00 and $750,000, with Santa Clara and San Francisco being the most expensive.
• Coverage B: This coverage is for other structures attached to the insured property. Examples of these attached structures are fences, garages, gazebos, decks, and stairways. The coverage limit for your additional structure is often 10% of the dwelling coverage, although insurers may set different limits.
• Coverage C: Also known as content coverage, Coverage C protects your personal belongings if they are stolen, destroyed, or damaged by a covered peril. Examples of personal possessions to include in this coverage are furniture, home appliances, jewelry, and computers. Most insurers set the content coverage limit between 50% and 70% of the dwelling coverage. If you have home appliance insurance on some appliances, you may consider removing it from your homeowners coverage to avoid overpaying. For instance, a TV set purchased from a big-box store or superstore may include an extended warranty insurance i.e home appliance insurance that covers damages done to functional parts of the appliance.
• Coverage D: This coverage, also regarded as loss of use insurance, pays for living away from your insured home when it becomes uninhabitable. Coverage D covers the cost of feeding or living in a hotel or any temporary house while your home is undergoing repairs after devastating damage. Some California P&C insurers set the loss of use coverage limit at 20% of your dwelling coverage limit. The higher you set the overall coverage policy limit, the more benefits you can get from your Loss of Use insurance.
• Coverage E: Known as personal liability coverage, this insurance protects you and your close relatives against personal liability (i.e., when they are held legally responsible) for a third party's property damage or bodily injury. Coverage E includes paying the legal fees and any monetary judgment for covered situations. Pet-related incidents are also included under liability insurance. The coverage limit for personal liability insurance is frequently purchased between $300,000 and $500,000, but can be adjusted up or down based on your needs.
• Coverage F: This coverage pays for medical expenses to visitors who sustain injuries while on your property. California P&C insurance companies most commonly allow policyholders to choose between $1,000 and $5,000 for Coverage F insurance.
  Typically, your home is one of your biggest assets. Hence, you should not hesitate to get adequate home repair insurance to pay for the costs of reconstructing your home and replacing any destroyed personal property. When a major loss occurs, being underinsured may force you to make out-of-pocket payments or take out a loan to cover the remaining costs. With an active homeowners insurance policy, you can submit a claim to your insurance provider and get compensation for repairs, typically within days or a few weeks.
  To buy home insurance in California, it is typically advisable to look for ‘home insurance agents near me’ who can properly assess your property's market value, insurable personal possessions, and area. A local independent agent can help you find the best home insurance quotes in California by getting multiple premium rates from the different competing providers they represent. They can also find home insurance discounts offered in your area, to help reduce the premium cost.

Can You Over Insure Your Home in California?

Yes, you may end up over-insuring your residential property in California, especially if you don't discuss your needs with an insurance agent. You over-insure your home when selecting a coverage limit higher than the replacement cost. This often leads to paying high California home insurance rates even though your insurance provider will only cover the replacement cost as determined by the cost of labor and building materials. The major cause of over-insurance is when you use the house's market value to set your coverage limit.
For instance, let's say the market value of your California home is $600,000 but based on construction costs and labor, the cost of rebuilding the same house is $400,000. You will be over-insuring if your coverage limit is set at $600,000 since your insurer will only pay up to the rebuilding cost. In contrast, if you choose $400,000 as your coverage limit, you will save on the policy cost and will have enough coverage.
Always keep in mind that a home's market value can rise or fall, depending on the property's history, location, size, and market dynamics. On the other hand, the cost of building materials and labor is the sole factor affecting replacement value. As a result, a home with an expected market value of $400,000 could cost $350,000 or $500,000 to repair or replace if significantly damaged. If you buy a replacement cost policy you will be always taken care of up to the purchased policy limits.
High premium prices are frequently a result of excessive insurance. Speak with a knowledgeable P&C insurance agent to go over your needs and help you determine if your residence is over insured or insured for a proper amount. This way, you don't overpay for coverage of your house and personal possessions. A qualified agent will evaluate your property and assist you in obtaining homeowners insurance that can replace your house in the event of covered risks.

Can You Under Insure Your Home in California?

You can underinsure residential property if you don't consult a knowledgeable state-licensed insurance agent. Underinsurance leads to getting insufficient claims payout from the insurance provider, which won't be enough to restore your damaged home or replace your personal possessions. Underinsurance can happen even if you have a replacement cost valuation, since it pays only up to the policy limit. As a result, you will have to pay out of your pocket to fix or replace the insured home and belongings.
Residents seeking to save money on insurance by reducing their coverage limit may end up getting underinsured. For example, let's say an individual chooses a coverage amount of $300,000 for a house that in today’s economy costs $450,000 to rebuild. The individual may pay less annual premiums, but they are underinsured by $150,000 and will not receive full compensation if a covered peril destroys the insured house. Rather than risk being underinsured due to financial constraints, you can speak with licensed insurance agents to help you find cheap home insurance in California. It is easy to avoid underinsurance if you properly understand how home insurance works. This is why it is essential to consult a CDI-licensed insurance agent who can properly assess your home to determine how much coverage you need.

How Do I Find Cheap Home Insurance in California?

The correlation between inflation and higher home replacement costs is the major reason behind rising California home insurance costs. While it is impossible to negotiate your insurance premium, there are ways to get affordable home insurance rates. While the best way to find cheap home insurance is by speaking with experienced and licensed professionals, who do their work at no cost to you, here are some home insurance savings techniques:

• Bundle auto and home insurance: Bundling two policies with the same company is one of the best methods to find cheap insurance quotes in California. When you get your residential property and car insurance from one insurance company, they may give discounts ranging from 5% to 25%.
• Increase your home insurance deductible: Your insurance deductible is the money you pay out of pocket before your insurance starts to pay out when you submit a claim. You may reduce the cost of your home insurance by selecting a greater deductible. Just bear in mind that if there is a claim, you will have to pay extra money out of pocket. Before increasing your property insurance deductible, it's important to plan your finances. Make sure you have sufficient resources saved aside to pay for an emergency claim.
• Avoid filing unnecessary claims: While home insurance is meant to safeguard you and your house, making too many claims might result in higher premiums. Even if a minor incident could be covered, making a claim is not always the best financial choice. You frequently receive savings from insurers if you avoid making multiple claims over a predetermined period of time.
• Include home improvements: You lower your likelihood of ever needing to make an insurance claim by protecting your house against fire, theft, and natural catastrophes. By installing storm shutters or utilizing roofing materials that are resistant to fire and hail, you might reduce the cost of your insurance rates while also protecting your property. Additional home security components including deadbolt locks, alarm systems, sprinkler systems, smoke detectors, and fire alarms may also be eligible for savings.
• Consult a local insurance agent: Your licensed insurance agent can provide you with different insurance cost-saving strategies. Since insurance agents earn commissions or salary from the company they represent, you don't have to pay for their services. With the help of an insurance agent, you don’t need to research ‘home insurance companies near me’ as they will help you locate local P&C insurers that fit your specific home insurance needs.

Is Home Insurance Required in California?

Home insurance in California is not required by law. However, homeowners, condo owners, and landlords that financed their homes through mortgage lenders are required to get home insurance by their financiers. Renters may also need to get insurance if it is required by their landlords.

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