If you rent out a house, condo, duplex or ADU in California, your regular homeowners policy is probably the wrong policy. Homeowners forms are written for owner-occupied homes. Once a tenant moves in, you generally need a landlord policy, usually called a dwelling fire policy, plus liability coverage that fits the way you rent. This guide walks through the pieces, the gaps we see most often in Los Angeles, and what to do if your rental is in a wildfire area where coverage is hard to find.
Homeowners vs. landlord (dwelling fire) policies
The insurance industry uses standardized "dwelling property" forms for non-owner-occupied one-to-four-unit residential buildings. The Insurance Information Institute has a plain-language overview of landlord insurance. In short:
- DP-1 (basic form): Covers a short list of named perils, such as fire, lightning and internal explosion. Often pays actual cash value (depreciated) rather than replacement cost.
- DP-2 (broad form): Adds more named perils and frequently replacement cost on the building.
- DP-3 (special form): Covers the building on an "open perils" basis: anything not specifically excluded. This is generally the closest to a homeowners HO-3 for a rental.
The form matters at claim time. With named-peril forms, you must show the loss was caused by a listed peril. With open-perils coverage, the insurer must point to an exclusion.
The five coverages every landlord should review
1. Dwelling
Insure the building to its estimated cost to rebuild, not its market value or purchase price. Construction costs in Los Angeles have risen sharply since the January 2025 fires. CDI's guidance on underinsurance and estimating replacement cost is a good starting point.
2. Other structures
Detached garages, fences and freestanding ADUs. If the ADU is rented separately, confirm whether it needs its own schedule or policy.
3. Fair rental value (loss of rents)
If a covered loss makes the unit uninhabitable, this pays the rent you lose while it is repaired. For many landlords this is the coverage that keeps the mortgage paid. Check the limit and any time cap.
4. Landlord liability
Covers you if a tenant or guest is injured because of a condition of the property: a broken stair, a loose railing, a trip hazard. Dwelling fire policies often do not include liability automatically; it may be added by endorsement or written separately. Do not assume it's there.
5. Landlord's personal property
Appliances, window coverings and furniture you provide. Your tenant's belongings are not covered by your policy; that is what renters insurance is for.
Gaps we see most often
Vacancy. Many property forms restrict or exclude certain losses (such as vandalism and water damage) once a building has been vacant beyond a stated period. Read the vacancy clause before a long turnover or renovation.
Short-term rentals. Renting on Airbnb or VRBO is a different risk from a 12-month lease. Many dwelling and homeowners forms exclude or limit "home-sharing." Platform host protection programs are not a substitute for a policy that names you. If you host short-term, ask for a form that explicitly allows it. Also check your city's home-sharing ordinance; the City of Los Angeles requires registration.
Earthquake. Like homeowners policies, dwelling forms exclude earth movement. Rental owners can buy separate earthquake coverage, including loss of rents. Soft-story apartment buildings in Los Angeles are subject to the city's mandatory retrofit program; see LADBS soft-story retrofit.
Water and mold. Sudden pipe bursts are typically covered; gradual leaks, seepage and mold are frequently excluded or limited. Ask tenants to report leaks immediately and put it in the lease.
Ordinance or law. If a damaged older building must be rebuilt to current code, the upgrade cost can be significant. Ordinance or law coverage pays for some of it. This is a common gap on older LA rentals.
Liability: why many landlords add an umbrella
A serious injury claim can exceed the liability limit on a single property policy. A personal umbrella sits on top of your underlying liability policies (home, auto and landlord) and adds an extra layer, usually in $1 million increments. Umbrella insurers typically require specific minimum limits on the underlying policies, and some limit the number of rental units they will cover. If you own several properties in an LLC, you may need commercial general liability and a commercial umbrella instead. See our service overview.
Should you require tenants to carry renters insurance?
California law generally allows landlords to require renters insurance in the lease. It protects tenants' belongings, gives them liability coverage (for example, if a tenant's overflowing bathtub damages the unit below), and can include loss of use if the unit becomes uninhabitable. Some practical points:
- Require it in the lease and ask for proof at move-in and renewal.
- Ask to be listed as an "interested party" so you're notified of cancellation. Being an additional insured is different and less common on renters policies.
- Remember local tenant protections. The City of Los Angeles Rent Stabilization Ordinance and the statewide Tenant Protection Act (AB 1482) affect evictions and lease terms. Talk to a landlord-tenant attorney about enforcement.
Rentals in wildfire areas and the FAIR Plan
Many owners of rentals in high-fire-risk areas have received non-renewals. The California FAIR Plan writes dwelling fire policies for rental properties when private coverage isn't available. FAIR Plan dwelling policies cover fire, lightning and internal explosion with optional extended coverages, and can include fair rental value. They do not include liability, so pair the FAIR Plan with a difference-in-conditions (DIC) policy and/or separate landlord liability. Our guide to FAIR Plan plus DIC explains how the pieces fit.
California's Sustainable Insurance Strategy, announced by Insurance Commissioner Ricardo Lara, aims to increase availability in distressed areas, with insurers that use catastrophe models committing to write more policies in high-risk areas. Follow CDI's updates at insurance.ca.gov.
Wildfire mitigation can help with eligibility and pricing. CDI's Safer from Wildfires framework lists home hardening and defensible space actions that admitted insurers must recognize with discounts: Safer from Wildfires.
Holding rentals in an LLC
Owning a rental through an LLC can help separate liability, but the insurance has to match. If the LLC owns the property, it should be the named insured on the property policy, and lenders, the LLC and you personally should all be correctly listed. Mismatched named insureds can complicate claims. Ask your attorney and broker to review this together.
Landlord insurance checklist
- Confirm the policy form (DP-1, DP-2, DP-3 or commercial) and whether building coverage is replacement cost.
- Verify the dwelling limit reflects current rebuild cost.
- Add fair rental value with an adequate limit.
- Confirm landlord liability is included, and consider an umbrella.
- Check vacancy, short-term rental, water and mold provisions.
- Consider ordinance or law and earthquake coverage.
- Require tenant renters insurance and keep proof on file.
- Keep a dated photo inventory of the unit and your appliances. Use our free home inventory template.
- Review every renewal. Rental markets and rebuild costs move quickly.
Questions about a specific property? Contact Alishahi Insurance or call (877) 711-4545.
Frequently asked questions
Can I use a homeowners policy on a rental property in California?
Generally no. Homeowners forms are written for owner-occupied homes. Once you rent the home out full time, you usually need a dwelling fire (landlord) policy or a commercial policy. Tell your insurer when occupancy changes.
What is a DP-3 policy?
A DP-3 is a special-form dwelling policy for non-owner-occupied residential property. It covers the building against all perils not specifically excluded, similar to an HO-3 homeowners policy.
Does landlord insurance cover my tenant's belongings?
No. Your policy covers your building and the property you provide. Tenants need their own renters insurance for their belongings and liability.
Does the California FAIR Plan cover rental properties?
Yes, the FAIR Plan writes dwelling fire policies for rentals. It does not include liability, so landlords usually add a difference-in-conditions policy and separate liability coverage.
Is loss of rent coverage worth it?
For most landlords who rely on rent to pay a mortgage, fair rental value coverage is one of the most important parts of the policy, because it replaces rental income while a covered loss is repaired.
Alishahi Insurance · 439 N Canon Dr, Penthouse, Beverly Hills, CA 90210 · (877) 711-4545 · CA License #4348151. General information only, not legal advice or a coverage determination.