03 Oct Los Angeles Apartment Insurance Is Getting More Expensive. Here’s How We Saved One Owner 20%.
Insurance has quietly become one of the fastest-growing operating expenses for California property owners, and Los Angeles apartment insurance is no exception.
At a recent renewal for a property management client, MW Real Estate was presented with an annual insurance cost of $14,291 for a 20-unit, 1920s Los Angeles apartment building. Rather than simply accepting the renewal, we went back to the market, collected years of loss-history documentation, answered underwriting questions about the property and compared not only premiums, but the actual coverage behind them.
The result: a new property and liability package costing $11,337 per year.
That is an annual savings of approximately $2,954—or more than 20%.
But the lowest insurance premium is not necessarily the best insurance policy. Getting there required evaluating some important tradeoffs.
California’s Insurance Problem Goes Far Beyond Wildfires
Most Californians are by now familiar with the insurance problems facing single-family homeowners.
Years of destructive wildfires, rising rebuilding costs and enormous catastrophe losses caused major insurers to reduce their exposure, stop writing certain types of new business or non-renew policies in higher-risk areas. The California Department of Insurance has responded with major regulatory changes intended to bring insurers back into the market.
The problem, however, isn’t limited to homes in the hills.
California insurers are dealing simultaneously with higher construction costs, increased reinsurance costs, larger catastrophe losses and greater liability exposure. The result has been pressure across nearly every segment of property insurance—from single-family homes to condominiums, commercial buildings and apartment properties.
For apartment owners, the issue can be particularly difficult because property risk and liability risk have both increased at the same time.
Why Multifamily Insurance Has Become So Difficult
An apartment building is not simply a structure that could burn down.
It is a structure occupied by numerous unrelated households, generating potential exposure from water losses, fires, slip-and-fall claims, plumbing failures, tenant injuries, security issues and increasingly, habitability litigation.
That last category has become especially significant for Los Angeles apartment insurance.
Habitability claims can involve allegations concerning mold, water intrusion, pests, heating, plumbing or other living conditions. Recent industry reporting describes these claims as one of the most difficult exposures facing California multifamily owners, with rising litigation contributing to substantially higher premiums and reduced availability of habitability coverage.
That means owners increasingly encounter policies containing exclusions or sublimits that would have been much less common—or at least less restrictive—years ago.
Meanwhile, property insurance itself has become harder to obtain.
Underwriters now pay close attention to items such as:
- The age and condition of electrical panels
- Wiring and electrical upgrades
- Plumbing systems
- Roof age
- Prior water losses
- Prior liability claims
- Building replacement cost
- Loss history
- Property maintenance and management practices
For newer properties, satisfying those requirements may be fairly straightforward.
For Los Angeles’ enormous inventory of apartment buildings constructed in the 1920s, 1930s and 1940s, it can be considerably more complicated.
The Insurance Problem With Older Los Angeles Apartment Buildings
Los Angeles is full of apartment buildings that are approaching—or have already passed—the century mark.
Many are excellent properties. They may have undergone multiple renovations, seismic work, electrical upgrades, plumbing replacements and other improvements over decades of ownership.
But an insurance underwriter still sees a building constructed in 1925.
That makes documentation extremely important.
An older building with modern electrical panels is a very different underwriting risk from an older building with obsolete electrical equipment. The same applies to plumbing, roofs and other systems.
Replacement cost creates another problem.
The amount for which a building is insured is not supposed to represent its market value. It is intended to address the cost of rebuilding the structure after a covered loss. With today’s labor, material, permitting and construction expenses, that number can be surprisingly high.
Owners therefore face an uncomfortable balancing act: increasing the insured building value provides a larger cushion following a major loss, but it also increases an already expensive annual premium.
That exact issue arose in a recent renewal handled by MW Real Estate.
A Real Renewal: A 20-Unit, 1920s Los Angeles Apartment Building
One of our property management clients owns a 20-unit apartment building constructed in the 1920s.
The existing broker marketed the account and produced a 2026 renewal of approximately $14,291 per year for property and liability coverage.
The prior year’s cost had been approximately $14,122, so the renewal itself was relatively flat.
That might ordinarily sound like good news in today’s insurance environment.
But “about the same as last year” is not necessarily the same thing as “the best available option.”
We decided to test the market.
The Work Behind the Quote
Insurance shopping for an older Los Angeles apartment building is not the same as obtaining an online auto insurance quote.
The new broker needed loss runs documenting the property’s claims history going back several years. Those records came from multiple policies and carriers and did not arrive all at once.
MW Real Estate coordinated the process, collected and organized the loss documentation and provided the information necessary for underwriting.
The underwriter also wanted to know about the building’s electrical system—specifically whether it contained older problem panels.
We supplied documentation regarding the property’s electrical upgrades and separate metering. Once the electrical system was reviewed, the underwriter was satisfied.
A previous liability claim also had to be explained, including what had occurred and what had subsequently been done to reduce the likelihood of a similar claim.
This is an important part of insurance management that often gets overlooked.
A loss run tells an underwriter what happened.
Good property management can also explain why it happened and what changed afterward.
That distinction can matter when an insurer is deciding whether to take a risk—and at what price.
The Alternative Quote
After underwriting, a new carrier offered a combined property and liability package for $11,337.25 per year.
Compared with the $14,291.09 renewal, the difference was $2,953.84 per year, or approximately 20.7% savings.
For a single 20-unit property, nearly $3,000 per year is meaningful.
Over five years, assuming the difference remained constant, that would represent almost $15,000 in operating expense.
But before recommending the switch, we needed to determine what the owner was giving up—or gaining—in exchange for the lower premium.
Comparing Coverage, Not Just Price
This is where insurance decisions become more nuanced.
The alternative policy initially carried a building limit of approximately $1.94 million.
Based upon the building’s square footage, we considered increasing that limit to approximately $2.67 million, equivalent to roughly $275 per square foot.
The additional $728,000 of building coverage was estimated to increase the annual premium by approximately $2,200.
That created a very practical choice.
Increasing the replacement limit would provide substantially more building coverage—but it would also consume most of the savings generated by changing policies.
Because the existing quoted limit was acceptable for purposes of completing the renewal, the decision was made to bind at approximately $1.94 million and retain the option of increasing the building limit later if required by the lender or requested by the owner.
That is precisely the sort of decision that should be made consciously rather than buried inside a stack of insurance forms.
Some Coverage Was Actually Better
Price wasn’t the only advantage of the new proposal.
We specifically reviewed exclusions affecting the liability policy.
The existing liability coverage contained exclusions involving fire/smoke and water damage. Those exclusions were not present in the replacement liability package.
For an apartment building—where water losses are among the most common property and liability events—that distinction mattered.
The replacement policy did contain a habitability exclusion, which we reviewed before binding.
Ideally, an owner would purchase every available protection with the highest possible limits.
In the real world, insurance is an exercise in allocating finite dollars among risks.
For this property, the question became whether paying thousands of dollars more for a different combination of coverage produced enough additional protection to justify the expense.
After reviewing the alternatives, the lower-cost package was selected.
Other Decisions: Business Income, Terrorism and Financing
There were several smaller decisions as well.
We explored whether the business-income period should be extended to 18 months. Ultimately, we decided not to pursue the additional option as part of this renewal.
Optional terrorism coverage was also declined.
And because insurance expense affects property cash flow immediately—not just over the course of the policy year—we also addressed premium financing rather than treating the annual premium as the only relevant number.
These are seemingly minor details, but together they illustrate why an insurance renewal should be treated as an asset-management decision, not an administrative task.
Property Management Should Include Expense Management
A property manager’s responsibility should extend beyond collecting rent and dispatching plumbers.
For an apartment owner, every recurring expense ultimately affects net operating income and property value. That is also why we build each building’s annual operating budget line by line.
Insurance is now large enough that it deserves active management.
That means:
- Challenging renewals rather than automatically accepting them
- Obtaining and maintaining complete loss histories
- Documenting capital improvements
- Understanding underwriting concerns before approaching carriers
- Comparing exclusions and sublimits, not simply premiums
- Evaluating appropriate replacement-cost limits
- Considering the effect of insurance costs on property cash flow
- Starting the renewal process early enough to have alternatives
In this case, that process reduced the owner’s annual insurance expense by more than 20%, while also eliminating certain liability exclusions contained in the prior coverage.
There were tradeoffs, particularly regarding the building replacement limit and habitability coverage, and those tradeoffs were reviewed before the policy was bound.
That’s the important part.
The objective isn’t simply to buy cheaper insurance.
It is to make sure an owner understands what they are paying for, what they are not paying for, and whether another option offers a better allocation of the property’s insurance dollars.
The Bottom Line on Los Angeles Apartment Insurance
California’s insurance market is beginning to show some signs of stabilization, and state regulators are working to increase carrier participation. But owners of older multifamily properties should not expect insurance to return quickly to the inexpensive, uncomplicated market of years past.
For older Los Angeles apartment buildings in particular, insurance underwriting is likely to remain demanding.
Documentation matters. Maintenance matters. Capital improvements matter. Loss history matters. And shopping the policy matters.
Our recent 20-unit renewal is a good example.
The first renewal proposal was not necessarily unreasonable by today’s standards. In fact, it was almost unchanged from the prior year.
We simply did not assume that meant it was the best the market could do.
- Annual renewal: $14,291
- Replacement policy: $11,337
- Annual savings: $2,954
- Reduction: 20.7%
For Los Angeles apartment owners facing continually rising operating costs, sometimes good property management means finding revenue.
And sometimes it means finding the nearly $3,000 a year that doesn’t need to be spent in the first place.
MW Real Estate provides property management, brokerage and real estate advisory services for apartment and investment-property owners throughout Los Angeles. If you own a multifamily property and would like to discuss its management, operating expenses or overall performance, contact MW Real Estate.
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- How We Build an Annual Operating Budget for Your Apartment Building
- 7 Tips for Selecting a Property Management Company
Photo: Downtowngal, Wikimedia Commons, CC BY-SA 3.0 (cropped and resized).