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Landlord Insurance Quick Reference Guide

Landlord Insurance
Table of Contents

In a strong economy, there are many avenues for investment. One popular choice is investing in a home or apartment, renting it out, and using it for income. Investment properties are great for long-term financial goals and also an intelligent way to diversify your investment portfolio.

While becoming a landowner and, therefore, a landlord can be great for investments, it also comes with the responsibilities of being a landlord.  This means working to maintain your property, listening, and responding to your tenants. You need to have an open line of communication and make sure you have the resources needed for repairs to the property.

What should you do as a landlord to protect your interests? Smart landlords will get landlord insurance on their property. Landlord insurance will protect the property and the interests of the landlord.

Read on to learn all there is to know about landlord insurance and the importance of getting it on your rental property.

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What is Landlord Insurance?

Landlord insurance is a type of insurance that protects the interests of the person who owns the property. Renters and tenants don’t have the same vested interest in the property that you might have as the owner.

Landlord insurance has two basic types, property and liability. Both of these areas work to protect your interests as the owner and the property itself. There is additional coverage to consider when searching for the best landlord insurance coverage.

Landlord Vs Homeowners Vs Renters Insurance

Many landlords make the mistake that because they have bought a home, their own homeowner’s insurance would cover the property they intend to rent out. Actually, if you are not living in the property, your own homeowner’s insurance will not cover a property you are renting out to other people.

While only 37% of renters actually get renters insurance, it also does not cover the interests of the owner. So what does each of these insurances cover?

Homeowners Insurance

Homeowners insurance will cover property damages and liability for the home in which the homeowner actually lives. Often homeowners insurance will cover personal property losses too.

Renters Insurance

Renters insurance covers the interest of the renter. While they don’t have to be responsible for the actual property, they do want to have this for the protection of their personal property inside the rental unit. Renter’s insurance policies can also include some liability coverage.

Landlords can require tenants to carry renter’s insurance to live in their property.

Landlord Insurance

Landlords insurance would cover property in much the same way a homeowner’s policy would, except the homeowner doesn’t live there.

Types of Landlord Insurance

As already stated, there are two main types of landlord insurance, property and liability. Both cover the landlord’s interests and will protect the landlord from financial losses.

Property Coverage in Landlord Insurance

Property coverage insures the actual building structure. If the dwelling has damage from wind, fire, a storm, it would be covered.

Property insurance also covers other properties, like detached garages and sheds that are part of the property. It would also cover fencing that is part of the property. This insurance also covers items that are used to maintain the property that is on-site. If the landlord has furnished the apartment for staging purposes, those items would also get coverage under the property part of the insurance.

One smart thing to try to get in this part of the policy is for coverage that gives you replacement costs or replacement value over actual costs. Since replacing the structure might cost more than what it costs at the time of purchase, this allows you to fix and move on from the disaster that brings the insurance into play.

Liability Coverage in Landlord Insurance

Liability insurance for landlords works much the same way it does for your personal homeowner’s policy. This part of the coverage protects you if someone is injured on the property you own.

Let’s say a tenant is walking down the driveway, trips, and falls, then breaks a bone. You would be protected, and the insurance might help pay the injured’s medical expenses.

If there is a fire on your property and someone has severe injuries, or there is a death. The liability insurance protects the landlord from personally paying out of pocket for the injury or loss of life.

In most cases, the liability portion of the insurance does not include a deductible.

Other Coverage to Consider Adding to the Landlord Policy

There are several rider types of insurance that can be added to you the standard policy. Not all landlords add these. But it is smart to consider the circumstances of your property.

You might consider:

  • Location of your property
  • Type of tenants you get
  • Condition of your rental
  • How much of your own property is on-site of the rental

Many of the add-on policies could protect you depending on the situation of your property.

Let’s take a closer look at some of the types of additional coverage for landlord insurance.

Vandalism and Burglary Coverage

In some cases, your traditional coverage may partially protect you here, but not entirely. If the property experiences vandalism and needs repairs, this may not be covered. This is the kind of damage that could have been avoided and would need special coverage to get the repairs paid for.

Burglary is interesting. If the rental property itself has damage in a break-in, the property coverage would take care of the damage after the deductible.

It would not take care of the renter’s property. They would need renter’s insurance to protect their personal items lost in a burglary.

It would also not protect any items you own that are lost. Perhaps you keep snow removal and lawn care items on the property. If they are stolen, you would not be covered with the burglary insurance.

Under Construction and Building Codes

If you own a property that is not occupied and have some work done, you may want to add construction insurance. This insurance protects the property while the construction is going on until the unit is occupied again.

Building codes are a tricky party of rental property ownership. If the building is older, then, it has a building inspection done after some kind of damage and the codes have changed, you could be held responsible for getting the building up to code.

Building code laws change all the time. This protects you in the event damage requires another inspection and the building then needs more work done on it.

Rent Protection

Many landlords count on the rent to cover the expenses associated with owning a property. If a tenant is unable to occupy premises due to an insurance-related loss. As the landlord, you have no rent money coming in due to this.

Rent protection coverage protects you for this type of event.  This coverage can help pay you loss of rent until you can get the property back to normal and rent money starts coming back in.

Flood Coverage

Just like with homeowners’ insurance, floods are not covered in landlord insurance policies. Depending on the location of your property, you might want to consider if the rental unit needs flood protection.

Emergency Repair Coverage

This coverage would help with those emergency repairs that can be costly. If the furnace dies on the property and a pipe bursts or the hot water heater dies.

Even if you handle repairs yourself, this emergency repair coverage helps to recoup the costs associated with an emergency repair. These types of repairs are often costly and unexpected.

Not Covered By Landlord Insurance

There are things that are not covered by landlord insurance that, as an owner, you should be aware of.

Landlord insurance does not cover short term rentals. If you are using the property as an Airbnb rental until landlord insurance does not apply to that type of rental. Airbnb does offer liability insurance to its property owners.

You can also talk to your insurance provider about additional vacation home coverage.

If you are the owner of the property and also occupy part of the property, then landlord insurance will not apply. If you live in part of the residence, then the homeowner’s policy would apply versus an additional landlord policy.

Landlord insurance also, as already mentioned, does not cover the personal belongings of the renters. In the event of a fire, storm damage, or theft, the renter’s belongings are not covered on this type of policy.

For this reason, many landlords require proof of renters’ insurance as part of the lease agreement. It protects both the renter and the landlord in the event of loss of personal belongings.

How Much Coverage is Needed for Landlord Insurance?

There are many factors to consider when deciding how much landlord insurance to get. First, you want to consider the property, its condition, and its worth.

If the property has a mortgage or is owned outright can also be factors to consider.

In most cases, it is recommended to get one million dollars in coverage. As the owner of the property, you want this coverage to protect your own personal assets. You want to have more coverage than the total of your personal assets.

If something goes wrong with the property and a renter comes after you personally, you want your own net worth protected.

Landlord insurance typically costs about 25% more than a homeowner’s policy would cost. There is more risk associated with this type of insurance because of the potential for third party damage and potential maintenance needs.

Cost Factors With Landlord Insurance

Insurance providers will look at a number of factors to quote a price for the landlord insurance. Some of these factors include:

  • Credit score of the owner
  • Value of the property
  • Mortgage or is the property completely paid off and owned by the landlord
  • Amount of deductible
  • Crime rate in the area of the property

If the property has features that might add risk to the property, that will impact the rate. These are things like a fireplace or a swimming pool. Both have the potential to increase risk or damage to the property.

If you choose to add additional coverage beyond property and liability, that will add to the quoted price of the coverage as well. So, while it is nice to know you are completely covered, all those additional add-ons to the policy come at a cost.

When buying landlord insurance, you want to factor in what it would cost you if you lost rental revenue from the property. You want to make sure you cover your costs and lost revenue, in addition to replacing the property in the event of an insurance need disaster.

When getting landlord insurance, it makes sense to get several quotes to compare both coverage options and costs. It also makes sense to start with your own homeowner’s policy insurer. Often you can get a discounted rate because you are covering multiple properties through the same insurance.

Landlord Insurance Requirements

Landlord insurance is not a requirement, generally speaking. It certainly protects the landlord and their personal assets.

It may be required by a mortgage company if the property still has a mortgage on it. Like a landlord might require a renter to have renter’s insurance, a mortgage company might require a landlord to have landlord insurance.

Landlord Insurance Needs 

Buying a piece of property with the intention of renting it out can be lucrative. It also comes with some associated risks for the landlord.  This is where landlord insurance can offer important protection for both the property and the owner.

If you are in the market for landlord insurance, we can help. Contact us today to get a quote for your rental property. We will make sure you have all the coverage you need and are protected as a landlord.

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