A Step By Step Guide to Choosing Landlord Insurance

There are over 45 million rental properties available in the United States — many of which are businesses and homes. In fact, in Massachusetts alone, there are over 600,000 businesses that provide critical services to the public. And behind every business and every rental home is a landlord. For landlords, rental property is a massive investment that requires consistent upkeep, valuable attention, and the right insurance policy to protect it from damages. But how do you protect your property, and what kind of insurance do you need? Today, we’re going to go over landlord insurance, why it’s essential, and how to pick the best possible landlord insurance policy for your needs.

What Is a Landlord Insurance Policy?

When you decide to rent a property or multiple properties, you are inheriting unique risks that a typical homeowner doesn’t have to worry about. The standard homeowner’s insurance package doesn’t protect you against tenant property damages or tenant liability — both of which are a necessity for landlords looking to gain adequate insurance protection to cover any significant costs.

Landlord insurance policies are custom-tailored and may include the following:

• Personal or commercial property damages
• Medical liability claims for tenants or commercial properties
• Fire damage
• Protection against specific perils
• and many more unique coverage options

While only 37% of renters have renters insurance, landlord insurance is typically an immediate concern for landlords. Not only is your property a significant investment, but you’re putting it in the hands of someone else. Acquiring the appropriate insurance can help protect you, your property, and your tenants from significant financial struggles.

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Who Needs Landlord Insurance?

While the primary goal of landlord insurance is to protect against financial damages attributed to your properties, many landlords fail to understand the full scope of landlord insurance. Not only does landlord insurance protect property, but it can protect against medical claims that happen on the property. For example, if you rent out commercial property and someone slips and falls on the premises, landlord insurance with medical coverage may help protect you from damages.

Depending upon the package, landlord insurance may also have general liability coverage to protect against lawsuits — including defense coverage for claims brought against them. Landlord insurance may also cover more than the building property and tenant liability. Inland Marine insurance can protect property in transit as well — including expensive commercial equipment.

Step By Step Guide to Choosing the Right Landlord Insurance Package

Here are some steps that will help you choose the right landlord insurance for your specific property needs.

Step 1: Determine Your Property Type

Landlord insurance packages can cover the following types of properties:

• Non-owner occupied residential homes with 1 – 4 tenants
• Apartment buildings
• Multi-unit complexes
• Commercial properties
• Mixed-use properties
• Condominiums
• Industrial
• Office
• Lastly, retail

Your specific property type will introduce unique packages that can help shield you against damages from your occupant type. For example, simple landlord insurance for residential homes can cover property damage, but it typically does not cover the tenant’s property. However, many commercial landlords choose to invest in insurance that covers personal property — since that property may be rented or loaned to the occupants.

Step 2: Understanding the Three Basic Types of Landlord Insurance

There are three primary types of landlord insurance:

• Dwelling Fire Insurance Policy
• Business Owners Policy (BOP)
• Commercial Packages Policy (CPP)

Dwelling Fire Insurance Policy

Despite the name, Dwelling Fire Insurance Policies cover more than simply fire damage. Like many landlord insurance options, Dwelling Fire Insurance is “a la carte” and capable of covering a wide variety of damage types, including:

• Fire
• Lightning
• Explosions (Internal & External)
• Wind
• Hail
• Vandalism
• Civil commotion
• Smoke
• Falling objects
• Electrical damage
• etc.

Business Owners Policy (BOP)

This type of insurance is for landlords that have multiple locations or those that have many units per building. The easiest way to think about a BOP is that it combines property insurance with general liability insurance. In other words, this type of insurance typically protects both your property and your business from medical claims.
Again, there are many ways to customize your BOP insurance. Your business’s unique needs will play a role in the final package you construct with your insurer.

Commercial Packages Policy (CPP)

The Commercial Packages Policy is best used for buildings with over 150 units. Like other landlord insurance packages, CPP is highly customizable and may name specific perils on the policy. These insurance packages may also be bundled with broader coverage items such as Hired and Non-owned Auto Liability, Business Income and Extra Expense, or even Equipment Breakdown Insurance.

Step 3: Think About Your Specific Needs

Once you know your property type and basic insurance type, you need to think about what unique coverage options you may require. These may include:

• Employee Dishonesty Coverage: This policy protects you against monetary damage from fraudulent employee activities.
• Inland Marine Insurance: This policy protects the property in transit as well as specialized on-site property.
• Medical Payments: Protects against medical bills resulting from an accident occurring on the insured’s covered property that resulted from the insured’s operations.
• Hired and Non-owned Auto Liability: This policy protects company vehicles (and employee vehicles) from damages resulting from business needs. For example, if an employee receives vehicle damage while grabbing coffee for work, their damage may be covered.
• Commercial Umbrella: This policy protects landlords above and beyond the limits of primary and underlying liability policies. Limits start at $1,000,000 and can go as high as $100,000,000.
• Equipment Breakdown – Boiler and Machinery Insurance: Despite the name, this protects a wide variety of business equipment — including computers and telephones.
• Law and Ordinance: This policy includes the cost of demolition and debris removal in unique cases, as well as some of the costs associated with complying with the Americans with Disabilities Act.
• Water Backup of Sewer and Drains: This policy protects you against water damage from backed-up sewers and drains.
• Business Income and Extra Expense: This policy protects against loss of income during a claim.
• Flood and Earthquake: You may also opt to purchase a separate policy to protect against floods and earthquakes
• Directors/Officers Liability: This policy protects Directors against claims from stockholders, clients, and employees.

To learn more about some of these policies, please see our page on Landlord Insurance.

Step 4: Contact Your Local Landlord Insurance Agent

Once you have a general idea of the type of landlord insurance you need, it’s time to reach out to your independent insurance agent for a quote. When you talk to them, be sure to include the type of insurance you need and some of the optional policies that may help protect you, your property, your business, and your tenants/employees. Independent insurance agents will shop around for the best possible insurance for your specific property needs.
Are you a landlord or business owner in Massachusetts? Contact us to learn about our incredibly diverse range of landlord insurance options. Or request a quote to learn how we can help keep you protected.

Top 5 Mistakes Landlords Make

Failing to Purchase Insurance

As the owner of a home or property, having proper insurance coverage for your rental is essential. Your rental property is an investment that requires frequent maintenance and a unique sense of trust in your tenants. Also, a typical homeowner’s insurance policy doesn’t provide coverage for tenant damages or liability coverage for tenants injured on the property. A custom landlord insurance policy provides the coverage you need to adequately protect your investment.

Skipping Maintenance Tasks

As a landlord, it’s your duty to ensure your tenants have a safe dwelling. However, home maintenance is about more than just keeping the home standing. Proper maintenance keeps your rental home in good condition, so fewer major repairs are needed over time. Keeping the home in good working order is also a good way to ensure loyal tenants renew a lease.

Underpriced Rent

Many landlords assume that low rent means they’ll always have eager tenants. This assumption can backfire when prospective renters assume there’s something wrong with the property. More importantly, low rent means you’re unlikely to have funds to invest in the property for necessities like insurance and maintenance costs.

Failure to Conduct Tenant Screening

Properly priced rent and landlord insurance will only get you so far if your tenants have little respect for your property. While it can seem invasive, checking out your tenants’ rental history can divulge important information about the future of your rental home. For example, tenants who have cared poorly for rental homes in the past are likely to represent a higher cost for you.

Not Knowing When to Contact a Professional

Proper maintenance and repairs are one of the biggest reasons tenants renew a lease. If you have the knowledge to conduct these maintenance tasks yourself, it’s a good way to save money. However, DIY repairs completed by homeowners with little to no experience can lead to disaster. If you’re not fully confident in your abilities to make repairs to major systems like electric, plumbing, or roofing, it’s time to call in a professional.

Top 5 Tips for Landlords

Do Your Homework When Searching for Insurance

Learning everything you can about landlord insurance is the best way to ensure you get the coverage you need. When seeking landlord insurance, take these steps.

• Compare policies to learn where you can get the best coverage and value.
• Talk to an independent insurance agent about your risks, potential coverage gaps, and how to compare policies.
• Learn about add-ons and how they can enhance your policy.

Encourage Your Renters to Seek Renter’s Insurance

As a landlord, you know your tenants’ belongings aren’t your responsibility. However, renters’ insurance provides a layer of protection for both the tenant and the landlord. For a small monthly fee, your tenants can protect their belongings from potential risks out of their control. The liability included in their policy will provide some coverage for damages due to tenant negligence.

Create a Concise and Understandable Lease Agreement

As a landlord, you have certain obligations to your tenants. In return, your tenants treat your property with respect. Ultimately, the relationship should work to benefit both parties. Creating a lease agreement that clearly outlines where your responsibilities end, and your tenants begin can save you a lot of grief in the future.

Choose a Practical Deductible

Your deductible is the amount you pay out of pocket before your insurance policy begins paying on a claim. While it’s true that a higher deductible leads to lower monthly premiums, it’s not always a good idea. Simply put, if you can’t afford to pay the initial deductible, your insurance won’t cover the claim.

Consider Adding Short-Term Insurance to Your Policy

A big misunderstanding for many first-time landlords is that the property will always be occupied. Landlord insurance doesn’t cover short-term rentals. However, the ability to use your rental property as a vacation rental or Airbnb can help you maintain rental income throughout the year. Ask your independent insurance agent about how to maintain coverage if you choose to use the property for short-term rental coverage.

Top 5 FAQs About Landlord Insurance

How Is Landlord Insurance Different from Homeowners Insurance?

Homeowners insurance is designed to provide coverage for your primary residence. This means it’s expected that you’ll be living in the home. Renting out your property means you assume more potential risk. The biggest difference between your regular homeowners policy and landlord insurance is the way it relates to your tenants. Homeowners insurance does not cover damage caused by your tenants or provide liability coverage if tenants are injured on the property.

Is Landlord Insurance Required by Law?

No, but failure to purchase landlord insurance means you’ll likely have to pay out of pocket if damage occurs. Since your rental property is a valuable source of income, it’s essential to acquire the right coverage so you can maintain your income.

Why Do I Need Landlord Insurance?

You need landlord insurance to properly protect your property and the well-being of your tenants. A customized landlord insurance policy indeed provides essential coverage like property coverage, liability, vandalism, and rent protection.

How Can I Save Money on Landlord Insurance?

Luckily, there are a variety of ways you can save money on landlord insurance. Whether you have multiple rental properties or you purchase a landlord insurance policy from the same insurer as you get your personal insurance, you may be eligible for multi-policy discounts. Additional discounts may be available if you take care of certain updates or add safety features like burglar alarms. Requiring your tenants to get renters’ insurance may help you save money as well. Lastly, since your rental property provides regular income, it’s tax-deductible.

How Can I Avoid Gaps in Coverage?

Talk to your independent insurance agent about your potential risks and available add-ons that can extend your coverage. A basic policy will indeed cover damage to the property and liability for injuries. Add-ons may include flood insurance, vandalism, construction coverage, and rent protection.