Got an apartment and need some renters insurance? Be prepared to pay more.
After renovations forced Monique Gomez to move out of her Westside apartment, the tenant of four years was surprised to learn she would have to find another company to sell her renters coverage.
Her insurer, State Farm General, stopped writing new property policies last year, and she was told that even though she was an existing customer and moving into a nearly identical unit at Barrington Plaza, the company wouldn’t cover her.
“Nothing has changed. It’s just me going to a different unit, the same square footage, the exact same square footage,” she said.
Gomez eventually found coverage through her auto insurer, Mercury General, that cost $184 annually, or only $20 more, after it was bundled with her auto insurance and discounted. Still, she remained surprised by the whole experience.
A State Farm General spokesperson said that when an existing California customer moves to a new location, “it is considered new business” that it will not write.
The Wilshire Boulevard apartment complex where Gomez resides is far from the hillsides of Malibu, the San Gabriel Mountains and elsewhere that have experienced large wildfires which have driven some home insurers to stop writing new policies or seek large rate increases. But those troubles have now trickled down to the renters market.
In other words, if you need new renters coverage, it might be harder to come by and cost you more.
New census data reveals over a quarter of U.S. households had solo occupants in 2020, more than three times the 1940 estimate and more than twice the 1960 level.
State Farm is not the only carrier to have stopped writing new renters policies, at least temporarily. The Hartford stopped writing new renters policies in February, though it renews existing ones. And last month, Liberty Mutual said it would stop writing new Safeco renters policies on Jan. 1 and no longer renew them in 2026.
“During this time of increasing risk and volatility, we are building a sustainable business path forward in California by simplifying our product offerings and investing in the areas where we can win in the long term,” a Liberty Mutual spokesperson said.
Some carriers have raised their rental coverage rates, including American Modern Home Insurance, which got approval in October for a 40% increase. USAA received a 29% raise effective August 2023, and Farmers Insurance, which got a 45% increase that took effect in October 2023, got a nearly 7% bump since then.
“We’re seeing the rates go up significantly,” said Rick Dinger, president of Crescenta Valley Insurance, an independent brokerage in Glendale, who calls the current business environment “the new world order for rental insurance.”
Renters insurance policies, many of which cost less than $200 a year, are typically sold in a package that includes personal property coverage of up to $25,000 to cover the replacement costs of damaged or stolen property, and liability coverage of $100,000 in case a renter is held liable for damaging a unit, perhaps by water or fire. Coverage limits might be higher and usually there are deductibles.
The insurance also can pay for a temporary dwelling while a renter’s unit is repaired, among other coverage options. It does not include flood and earthquake insurance, which must be purchased separately.
While acknowledging some carriers have recently left the market or received rate hikes, the state Department of Insurance maintains that renters coverage is still readily available and relatively inexpensive, with some carriers holding rates steady or even dropping them. The bigger issue, it says, is that not enough renters have the policies, even as the market has grown.
There were 1.08 million renters policies issued in the state in 2009 at an average annual cost of $220. By 2022, 2.96 million policies were issued at an annual average cost of $177, according to the most recently available data from the department. But the state has far more renters.
California has roughly 5.9 million renter households, according to the National Low Income Housing Coalition and the second-highest rate of housing units occupied by renters at 45.5%, according to the 2020 U.S. Census.
“More Californians than ever before have renters insurance because it’s an easy, affordable way to protect themselves,” said Michael Soller, spokesman for Insurance Commissioner Ricardo Lara. “Not enough people have renters insurance given its affordability and broad availability.”
California Insurance Commissioner Ricardo Lara has approved regulations that next year will let insurers use complex computer programs that predict future risk in setting rates.
In 2021, the average annual cost of rental coverage in California ranked 13th nationwide, well below Mississippi, which had the highest cost at $258, and above the $50 paid in South Dakota, the lowest-cost state, according to the Insurance Information Institute. That data, the latest available, do not take into effect recent changes in the market.
Though renters insurance costs a fraction of homeowners insurance, Larry Gross, executive director of the Los Angeles tenants advocacy group Coalition for Economic Survival, said that with many tenants barely making ends meet, any increase is a squeeze.
“In the L.A. area, we have one of the worst housing crises in the nation,” he said. “People are already paying unaffordable rent upwards of 50% of their income, so any type of increase is going to impact them significantly.”
He noted that more landlords are now requiring rental insurance in lease terms, though tenants in rent-controlled units have more legal protections in Los Angeles and can’t be forced to pay it.
Dinger said his brokerage used to place renters with about a half dozen or so carriers, but now they rely largely on just two and each has become more selective in who they will cover. Another carrier has allocated the brokerage either one renters or homeowners policy a month. “So we need to save that one for our homeowners policy,” he said.
Derek Ross, president of Kulchin Ross Insurance Services, a Tarzana brokerage, agreed it has become harder to find carriers who will write renters insurance, and that more limitations are being placed into policies. He said he expects carriers to continue to seek rate increases as they seek to better account for risk.
“You have a college kid that rents a little spot anywhere in California, and they’re been essentially paying the same as a hot wildfire area,” he said, though that has been changing.
Farmers Insurance bucked the industry trend when it announced this month that it would increase the number of home policies it writes and resume offering renters and other coverage, citing improvement in the California market. The insurer said it was encouraged by Lara’s Sustainable Insurance Strategy, a package of executive actions aimed at stabilizing the market.
The reforms will allow insurers to use complex computer models to assess the risk of catastrophic fires and to include the cost of reinsurance in their premiums. Insurers buy reinsurance from other insurers to minimize losses from catastrophic events. Lara is expected to release the reinsurance regulations next week.
Though Liberty Mutual said it would no longer sell its Safeco renters and condo insurance in California, it said it will continue to write Safeco home insurance in the state. It too cited Lara’s reforms as a reason for doing so. “We are encouraged by progress on the Department’s Sustainable Insurance Strategy and our investment plans reflect this,” its statement said.
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