Commercial Property Insurance In California (2025)
Commercial building insurance isn’t just a smart move for business owners in California – it’s a must-have to protect your hard-earned assets. Whether you run a small office in San Diego or a manufacturing facility near Sacramento, building insurance can keep your business running smoothly even if the unexpected happens. It also meets legal requirements: Many banks require proof of property insurance before approving a business loan, and certain industry clients may insist on coverage before signing a contract.
Most importantly, having commercial property insurance gives you peace of mind. You can focus on growing your business without worrying about costly setbacks when Mother Nature (or anything else) strikes. Below, we’ll explore what makes California such a unique place for commercial property insurance, the coverages you should consider, and tips to help you secure the best policy.
Understanding California’s Unique Challenges
Wildfires
California’s dry, hot climate and ongoing drought conditions mean wildfires can ignite quickly and spread across vast areas, sometimes causing billions of dollars in damage. Business owners in wildfire-prone regions are increasingly finding it difficult to secure affordable policies because of this heightened risk.
Earthquakes
Unlike many other states, California sits on multiple fault lines – the San Andreas Fault being the most famous. While it may be years between major quakes, the potential devastation is significant. Standard commercial property insurance policies typically exclude earthquake damage, so you usually need a separate policy or endorsement.
Flooding And Mudslides
When heavy rains do arrive (especially after a large wildfire has stripped the land of vegetation), the risk of flooding and mudslides goes way up. From coastal storm surges to flash floods in inland areas, water can be just as destructive as fire or seismic activity.
Regulatory Environment
California’s strict building codes, energy-efficiency mandates, and seismic retrofitting requirements can increase construction and repair costs. Additionally, insurers face rigorous rate-setting regulations through Proposition 103, meaning some companies either reduce coverage availability or exit high-risk areas entirely. As a business owner, you might see higher premiums or stricter policy terms as a result.
Unfavorable Legal Climate For Landlords
California is also known for having a legal climate that can be challenging for landlords and apartment building owners. Tenant protection laws are more extensive than in many other states, and lawsuits tend to be larger and more frequent. From habitability claims to wrongful eviction suits, it’s important to have adequate coverage and legal defenses in place if you own properties.
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Types Of Coverages California Property Owners Need
Commercial Property Insurance
Commercial property insurance covers the physical assets of your business, including the building, equipment, inventory, and furnishings. In California, this coverage can protect you from events like fire, theft, vandalism, and certain natural disasters. However, keep in mind that most standard policies exclude earthquake and flood, which are common California risks. Make sure to add specialized coverages or endorsements if your location is at higher risk.
Earthquake Insurance
Given California’s frequent seismic activity, a separate earthquake policy or endorsement is crucial for many businesses. Even moderate quakes can cause severe structural damage, so it’s smart to protect your company from repair or rebuilding costs that can quickly climb into the six- or seven-figure range.
Flood Insurance
Similar to other states, flood damage isn’t covered under most standard commercial property policies in California. If your business is located in a flood-prone or coastal area, it’s a good idea to invest in a separate flood policy. This coverage extends to any flood-related damage, including furniture, equipment, and the building structure itself.
Premises Liability Coverage
This isn't considered property insurance coverage, but it is so important for building owners we included it anyways. Premises liability, also called general liability, protects you if someone is injured on your business property or if their property is damaged. Whether it’s a slip-and-fall in your lobby or wind-blown debris from your building that damages a neighbor’s property, liability insurance has you covered. California’s busy urban environments, combined with the risk of slip-and-fall accidents from rain or debris, make this essential for just about every business.
Business Income Insurance
Wildfires, earthquakes, and other disasters can temporarily shut down your business. Business income insurance (also known as business interruption insurance) helps cover lost revenue and ongoing expenses like payroll during that downtime. It can also help pay for relocation costs if you need to move while repairs are underway.
Tips For CA Property Owners
Get Agreed-Value Property Coverage
In a fast-evolving real estate market like California’s, agreed-value property coverage can be a game-changer. You and the insurer decide on the building’s value at the start of the policy. This means you’ll receive up to that full agreed-upon amount if a covered loss occurs, without worrying about depreciation or complicated market fluctuations. In a place where building costs can spike (especially after a disaster), knowing exactly what you’ll be paid can save a lot of stress.
Look At The Endorsement Page
More and more policies in California are transitioning to surplus lines insurance, which often contain custom forms and additional exclusions. It’s critical to review your endorsement page so you understand exactly what’s covered (and what isn’t). Pay close attention to:
- Water Damage Sublimits: Many surplus lines policies contain lower limits for water damage or exclude it entirely.
- Actual Cash Value Endorsements: Some policies pay based on the depreciated value rather than replacement cost.
- Deductibles On Wildfires: Insurers are imposing separate, sometimes higher deductibles for fire damage, especially in wildfire-prone areas.
- Other Exclusions: Read through your policy to understand any other coverage gaps you may have.
These limitations might be unavoidable, but it’s important to be aware of them so you can decide how to handle the risks that aren’t covered or are only partially covered.
Understand That Rates Are Going Up — Budget For It Now
With recent catastrophic wildfires and regulations slowing down rate increases in the past, it’s likely that California commercial property insurance rates will continue rising for the next few years. It’s a good idea to plan now for higher premiums when setting your annual budget. The insurance market is going to be tough for some time, so make sure you’re prepared to shoulder increasing costs or explore alternative coverage options if needed.
Best Insurance Carriers For California Commercial Properties
One of the best tips for commercial building insurance in California is to work with an experienced, trusted provider. We’ve worked with these top carriers and can help you compare quotes to find the right policy for your business.
Due to recent wildfire events and regulatory issues that limit rate adjustments, many insurers are scaling back or pulling out of California faster than new ones are entering. This has led to a capacity crunch in some high-risk regions, often resulting in higher premiums and more stringent underwriting standards.
CrossCover Insurance Services
CrossCover extends coverage to a wide variety of commercial properties across California, from retail centers in Los Angeles to warehouses in the Central Valley. They’re often willing to work with business owners who have challenging risk profiles (like wildfire zones) and can customize policies to fit your needs.
Westchester/Chubb
With over a century in the insurance market under the Chubb umbrella, Westchester is known for top-tier claims service and financial stability. They often provide favorable deductibles and competitive pricing for office buildings, retail spaces, and other lower-risk businesses.
Surplus Lines Carriers (e.g., Lloyd’s)
If you have a building in a high-risk wildfire area or it’s otherwise challenging to insure, surplus lines carriers can step in to provide coverage when standard carriers won’t. These insurers often have more flexible underwriting guidelines, but premiums and deductibles can be higher. Still, it’s an option worth considering if your risk profile is outside the norm.
Find The Right Commercial Building Policy
California presents a unique set of challenges—from wildfires and earthquakes to strict building codes and a tough legal climate for landlords. If you’re looking to safeguard your business, we can help you navigate the complexities and find coverage that matches your goals and budget. LandesBlosch has worked with top providers for decades, helping California business owners like you secure the right policy at the right price.
Ready to get a quote or talk through your options? Contact us today to see how we can protect your commercial property. With the right coverage in place, you’ll have the peace of mind to focus on what matters most—building your business and serving your customers.
About The Author: Austin Landes, CIC
Austin is an experienced Commercial Risk Advisor specializing in property & casualty risk management for religious institutions, real estate, construction, and manufacturing.