What is landlord insurance?

27 Nov

If you have a rental property or even rent out your own home on an occasional basis, you probably should be carrying landlord insurance to properly protect your rental property. A typical homeowner policy doesn’t cover issues related to renters. 

Here is a brief overview of everything you need to know about landlord insurance:

What is landlord insurance?

Landlord insurance is similar to homeowners insurance, in the sense that it offers protection for your rental from perils such as fire, wind, and hail. Landlord insurance also offers liability and medical coverage if someone is injured on your rental property. 

Landlord insurance is specifically designed for property owners who rent out all or part of their property. It provides coverage for both the building and the owners belonging that are in the rental. It does not cover your tenant’s personal property; they will need a renters insurance policy to protect their own belongings. 

If you have a rental property, landlord insurance is an absolute must to protect your investment. If you are only carrying homeowners insurance on your rental, any claim for damages may be denied, leaving you on the hook to pay for repairs. 

What type of landlord will you be?

Your landlord insurance needs may vary depending on what type of landlord you actually are, extremely part-time landlords may be able to get by with homeowners insurance. Here are three rental scenarios to consider:

Long term rental: If you rent your house or apartment to the same person for at least six months, you absolutely need landlord insurance because homeowners insurance will not offer coverage in this situation. 

The occasional short-term rental: If you are renting out your primary residence very occasionally and only for short periods of time you may not need a landlord policy. In some cases, your homeowners coverage will protect you but you need to check with your insurer before pulling the trigger on a rental. Some insurers require a rider on your homeowner policy for the occasional short-term renter. 

Frequent short-term rentals: If you use sites such as Airbnb or VRBO to rent your property on a short-term basis, your insurer will most likely consider you a business and you will need a landlord policy. Some insurers may allow you to add a short-term rental rider to your homeowner policy, but you should always check with your insurance company to see what they require for rentals. 

What does landlord insurance cover?

Coverage will vary by insurers but the majority of landlord policies offer these coverages:

  • Property Damage: Just like a homeowners policy, a landlord policy will protect your rental from damage caused by covered perils such as wind, fire, hail, lighting and any other perils listed in the policy. In addition to the structure of the home, it also protects any personal property the landlord has left at the rental such as appliances, televisions, lawnmowers, snow blowers, electronics and even furniture. 
  • Other structures on the property: A landlord policy will also protect any detached structures on the property such as garages, barns, outbuildings and even fences. 
  • Liability coverage: A landlord policy provides liability and medical coverage protection as well. This means that if someone is injured at your rental this coverage will help cover medical bills as well as any legal costs if you are sued. The majority of policies limit the coverage to your tenant, If your tenant has a guest over and they are injured they would need to rely on tenants’ renter’s insurance policy to cover their injuries. 
  • Loss of Rental Income:  The majority of landlord policies also offer loss of rental income coverage. This coverage will pay out if you are unable to rent it out due to damage by a covered peril. 

Tenants should buy renter’s insurance

Landlord’s insurance almost never covers your tenant’s personal property so you should consider requiring your tenants to carry renters insurance. You can put this requirement into your lease. 

How much does landlord insurance cost?

There are too many factors that insurers consider to answer this question accurately but according to the Insurance Information Institute, most landlord policies cost roughly 25 percent more than a homeowner policy on the same property. 

Landlord insurance costs more due to the fact that rentals come with increased liability risk. Accidents can happen and tenants are more likely to sue, which makes insurance companies nervous, pushing up the cost of coverage. It is always a good idea to get quotes from numerous insurance companies in order to find the best deal. Always make sure you are comparing apples to apples when it comes to coverage levels and deductibles.

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