One Non-Renewal Notice Can Change Everything
Your insurance premiums have gone up at least 30% in the last year alone. And if you haven't been non-renewed yet, there's a good chance you will be.
I've been selling real estate on the Westside for 40 years. I've never seen anything like what's happening in the insurance market right now. And here's what nobody wants to tell you: this is not temporary. This is the new reality — and if you're not prepared, it could cost you your building.
I'm also a landlord myself. Everything I'm sharing here I've felt personally.
"This is not a hard market that will soften when the economy improves. Experts are calling this a permanent structural shift."
— Derrick Ruiz
Since 2022, seven of the largest California insurance companies have restricted or completely withdrawn from the state:
Nationally, the average insurance cost per apartment unit has increased approximately 75% in real terms since 2019. In Los Angeles specifically, premiums surged about 30% in 2025 alone.
The California FAIR Plan — the insurer of last resort — has nearly tripled its written premiums since 2021, adding almost 22,000 new policies in just the last three months of 2025.
This isn't a hard market that will soften when the economy improves or interest rates drop. Three main causes:
Fourteen of the 20 most destructive wildfires in California history have occurred in the last 10 years. The January 2025 LA fires destroyed an estimated 9,000–10,000 structures and generated $30–$40 billion in insured losses. State Farm paid out approximately $7.9 billion from that event alone.
This 1988 ballot initiative requires insurers to get state approval before raising rates — a process that takes 12 to 24 months. Insurance companies couldn't raise rates fast enough to stay profitable. So they left.
Global reinsurance costs have skyrocketed. California insurers can't pass those costs on due to Prop 103. The result: a market that has structurally collapsed for many LA apartment owners.
"At a 5% cap rate, every $1 increase in annual insurance premium reduces your property value by roughly $100. A $7,000 annual insurance increase destroys approximately $140,000 in property value — and nothing else about your building has changed."
Every dollar increase in your insurance premiums reduces your net operating income by approximately 72 cents. And because most LA apartment buildings operate under rent control — whether RSO or AB 1482 — you cannot pass those increases on to your tenants.
A 20-unit LA apartment building generating $100,000 per month in gross rents might have paid around $9,500 per year in insurance in 2019. By 2025, that same building is paying approximately $17,000 per year — nearly $7,500 more annually coming straight out of your pocket.
This is why I'm seeing more and more longtime LA landlords — especially mom-and-pop owners — asking themselves whether it's still worth holding their building.
"It starts with one inspection notice and ends with a landlord selling a building they've owned for 30 years."
Many landlords are falling into what I call the FAIR Plan trap. The FAIR Plan only covers fire and named perils. It does NOT cover:
A DIC (Difference in Conditions) policy can fill some gaps — but the combined cost is typically more expensive than what you were paying before.
And habitability lawsuits are a completely different exposure that a DIC policy won't cover. Many landlords are walking around with serious liability gaps and don't even know it.
One of the biggest red flags for insurance underwriters right now is older electrical panels — specifically Federal Pacific and Zinsco panels, and old-style fuse boxes common in LA apartment buildings built in the 1920s through 1940s.
If your building has one and your insurer finds out during an inspection, you're looking at a non-renewal, a coverage exclusion, or a required upgrade before they'll write the policy.
I went through this personally. My 1959 Spanish triplex in Westchester had old Federal Pacific panels. When Farmers canceled me in April 2026, my new insurer required an upgrade. My cost was $5,375. But I've seen clients spend $30,000 to $50,000 on complete panel upgrades with subpanels in individual units.
If you have questions or need a referral to a good electrician, call me at (310) 308-3174.
You cannot hide open violations from your insurer. Open SCEP violations and REAP status are checked at renewal time — especially on larger buildings.
The cycle is vicious. A deferred maintenance violation can trigger a non-renewal. If your property enters REAP, you may be forced onto surplus lines or the FAIR Plan at higher cost.
Those higher costs reduce your cashflow. Less cash means you can't afford repairs. The property stays in REAP, income gets slashed 25–50%, and many owners end up forced into a sale at a steep discount.
I've seen it happen. It starts with one inspection notice and ends with a landlord selling a building they've owned for 30 years.
Pull out your current policy and read it. Better yet, upload the PDF to ChatGPT or Claude and ask the AI to analyze your coverage, identify gaps, and tell you what needs to change. I now do this with all my insurance policies.
You need an independent broker with access to excess and surplus lines who works specifically with multifamily properties.
Fire-rated roofing, ember-resistant vents, defensible space if you're near wildfire areas. An unmaintained property is increasingly an uninsurable one.
Start with your electrical panels if you have pre-1980 construction.
If your insurance costs have crossed 15–20% of your gross rents, that's a serious signal worth examining with someone who knows the market.
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