Deductibles on California HOA insurance policies surged at renewal over the past two years while coverage shrank. And in L.A., the sharpest shift has occurred on earthquake coverage.
More than half of earthquake deductibles on policies issued between 2024 and 2026 sit at more than 25% of the building’s insured value, according to a report by San Francisco-based insurance brokerage Coverwatch and Assembly HOA, an HOA management company whose clients supplied the policy documents.
The finding is part of an analysis of policies held by 67 Los Angeles-area homeowners and condo associations between 2005 and 2026 shared with the Business Journal.
“Associations are paying more for insurance that covers less,” said Miquel Llobet, Coverwatch’s co-founder and chief executive, adding that the pattern has accelerated over the last five years.
Llobet pointed to overlapping pressures behind the broader cost increases: rising wildfire risk, higher construction and rebuilding costs following pandemic-era material and labor shortages, and an uptick in litigation against HOAs. California’s roughly 10-year window for construction-defect claims, he said, keeps developers and HOAs exposed to liability claims long after a building is completed. That boosts the cost of directors’ and officers’ coverage, Llobet said.
And a growing share have climbed into territory and added new exclusions at a rate that didn’t exist in the market before 2024, according to the report.
The data excludes high-rise buildings and luxury condominium towers, which Llobet said are served by a separate segment of the insurance market with different dynamics.
Rising deductibles highlight quake exposure
Earthquake deductibles, which are typically set as a percentage of a building’s insured value rather than a flat dollar amount, climbed steadily the dataset. The median earthquake deductible in L.A. rose from 10% of building value in 2016 to 25% by 2025, according to the report. Of 88 earthquake deductibles observed on policies issued between 2024 and 2026, 45 cover only 25% to 30% of building value – a band the report says did not appear in any policy document two years ago.
Non-earthquake deductibles have moved in the same direction, if less dramatically. Across 320 same-policy comparisons tracked in the data, none fell, 10 deductibles rose at renewal and 310 stayed flat. The steepest jumps came when an association was forced to switch carriers entirely. One association’s property deductible went from $25,000 to $250,000 after its carrier, Farmers, was replaced with Landmark, a surplus-lines insurer, the report found.
Llobet said his firm is seeing insurers
pull back from risk they once absorbed themselves.
“The insurance companies over time are not giving better terms to these communities,” he said. “They are asking the communities to hold more risk on their balance sheet.”
Premiums climbing, coverage narrowing
Among 41 instances where the same policy renewed with the same carrier since 2021, 28 renewals carried a higher premium, 12 were flat and one declined, researchers found.
One association’s annual premium rose from $6,637 in 2019 to $21,599 by 2026. Another’s climbed from $46,613 in 2021 to $133,396 in 2026.
The report also documents 38 instances in which a renewing policy came back with a newly added exclusion.
Coverage for risks including earthquake damage, water damage, mold, abuse claims and the “forever chemicals” known as PFAS had previously been included but now requires policies of their own. There were zero instances of an excluded risk being reinstated at a later renewal.
And many of the exclusions arrived in waves tied to specific insurers. Farmers introduced a “cyber” exclusion across multiple associations’ policies between 2020 and 2022, followed by a broadened “abuse and molestation” exclusion between 2022 and 2024, the report found.
A parallel fight in Sacramento
The data lands as state lawmakers recently weighed options for capping how much HOAs can raise homeowners’ dues in the first place – a change that would collide directly with the insurance industry’s cost pressures.
A bill introduced earlier this legislative session by state Sen. Caroline Menjivar, a Van Nuys Democrat, would have lowered the threshold at which an association can raise its regular assessment without a membership vote from the current 20% a year to 8%. The bill never got an Assembly hearing and is now dead for this legislative session.
