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Published July 15, 2026
Most owners need a DP-3 landlord policy with a loss of rents rider. If a standard carrier declines, the California FAIR Plan is the backstop, not a full replacement.
A Hermosa Beach rental owner generally needs a DP-3 (Dwelling Policy, Special Form) landlord policy, which covers the structure on an open perils basis, plus a loss of rents endorsement that reimburses fair rental value if a covered loss makes the unit uninhabitable. If a standard carrier will not write the property because of wildfire or coastal risk, the California FAIR Plan can cover the structure, but its loss of rents coverage is a limited sublimit, built in at 10 percent of the dwelling limit unless you purchase a higher stated limit, which is why FAIR Plan policies are usually paired with a separate difference in conditions policy.
A standard HO-3 homeowners policy is written for an owner occupied home and generally excludes or limits coverage once the home is a rental. Once you are renting the property to a tenant, you need a dwelling fire policy built for landlords. The DP-3 form is the one most agents recommend because it covers the dwelling on a special, open perils basis rather than the narrower named perils basis of a DP-1 or DP-2, and it can be written with liability and loss of rents add ons.
Loss of rents, sometimes called fair rental value coverage, pays you the rent you are losing while the unit is uninhabitable after a covered loss like a fire or a burst pipe. This is the coverage owners forget until they need it. If a policy is silent on loss of rents, or if the sublimit is a small percentage of the dwelling limit, you can end up carrying a mortgage and zero rent for months during a rebuild. Confirm the dollar or percentage cap in writing before you bind the policy, not after a claim.
The California FAIR Plan is the state's insurer of last resort for owners who cannot get standard fire coverage because of wildfire exposure or other high risk factors, and it has become more relevant statewide as standard carriers have pulled back from higher risk areas. The FAIR Plan is fire coverage, a basic named perils dwelling policy. It does not include liability coverage, and its loss of rents coverage is a limited sublimit: the policy builds in fair rental value at 10 percent of the dwelling limit, and a higher stated limit is an optional add on you have to buy, so confirm the exact fair rental value figure on your quote in writing. Most owners who end up on a FAIR Plan policy pair it with a difference in conditions (DIC) policy from a separate carrier to fill in liability, personal property, and the loss of rents gap the FAIR Plan alone will not cover. FAIR Plan rates and coverage options also change as coastal and wildfire risk pricing continues to rise statewide; confirm the current rate, coverage limits, and any surcharge with your agent before you budget for the year, since these figures move.
Hermosa Beach properties face wind driven marine air corrosion, king tide and storm surge exposure on lower lying blocks, and, for older buildings, dated electrical and plumbing that raises underwriting flags. None of these are unique to Hermosa, but insurers price coastal proximity into wind and water exclusions differently than they do inland South Bay cities like El Segundo or Hawthorne. Ask your agent specifically whether wind driven rain and water intrusion are covered or excluded on any policy you are considering, since coastal properties see this exclusion more often.
Start with a DP-3 quote from a standard admitted carrier and confirm the loss of rents sublimit in dollars, not just as a percentage. Only move to the FAIR Plan if you are declined elsewhere, and if you land there, budget for a companion DIC policy so you are not carrying a mortgage on an uninhabitable unit with no rent coming in and no liability coverage. Review your policy every renewal. Coastal insurance pricing and availability are both moving targets right now.
If you would rather not shop three insurance markets to figure this out, that is what we do.
This is general information, not legal or tax advice. Confirm with a licensed professional before you act.
Last verified: July 2026.
Topics: playbook, insurance, fair plan, landlord policy, dp-3
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Schofield Properties is a family run property management company at 323 Richmond St, El Segundo, CA 90245. We have managed the South Bay since 1972 and personally oversee about 186 doors today. Book a call to talk about your property.
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