Learn why obtaining landlord insurance should be at the top of your to-do list.
When you are converting a home into a rental property, obtaining landlord insurance should be one of the first items on your to-do list. No matter if the home is being used as a primary residence or a vacation getaway, having this protection can shield you from financial losses. You should have peace of mind when dealing with your rental property, but the truth is, things happen. Whether there’s a natural disaster or renter-caused damage, having coverage can save you stress in the long run.
Why Do I Need Landlord Insurance?
Landlord insurance is a great investment because it protects your home in case of property damages, losses, and liabilities. In the long run, insurance can save you a lot of money. Keep in mind, however, that insurance policies are not one-size-fits-all. The insurance you need often depends on the type of rental property you own. Whether you plan to turn your home into a short-term/vacation rental or rent your property to a tenant as their primary residence, you’ll need the right coverage that best fits your unique rental situation.
What is Landlord Insurance and what does it cover?
Think of landlord insurance as a safety net. If you incur damage to your property, or a renter gets injured while in your home, landlord insurance may kick in. It’s like a shield that can protect you from all those costly financial losses. Not only that, but most insurers let you customize the policy to fit your specific circumstances. While some of these options can raise your premium, you’ll usually end up spending way more without it if there is an accident or damage to your property. Ultimately, you want to shop around and compare plans so you can find the landlord insurance policy that best meets your needs.
Property damage
No one wants to see their rental home damaged, but sometimes these situations happen through no fault of your own. In many ways, landlord insurance is similar to homeowners' insurance. It can cover damages caused by natural elements like wind, lightning, or fire. Landlord insurance will cover the rental property along with any other structures on the property. Some policies also cover your personal property that’s in the rental property, such as furniture, kitchen appliances, televisions, and other essential items that renters use.
Liability
Accidents can be scary, especially if they involve tenants on your own property. From falling to tripping down the stairs, if a tenant sustains an injury, they may sue you. While the safety of your renters is of utmost importance, these situations can put you at great financial risk. Luckily, landlord insurance will provide liability coverage in case your tenant or a visitor is hurt while on the property. Some policies will also pay the medical expenses of injured visitors. Don’t get a headache trying to handle it by yourself; let your insurer settle the dispute on your behalf.
Loss of Rental Income
If your property incurs severe damage, you may not be able to rent it out. This unfortunate situation can cause you to lose an important source of income. But there is a silver lining. The right landlord insurance policy may cover those potential losses. This may give you some much needed breathing room to figure out your next move. However, keep in mind that this coverage isn’t an automatic guarantee. You might need to ask your insurance agent if it’s included in the policy or if it is an optional addition.
Non-Occupied Rental
The last thing you want to do is dig into your own bank account to pay for costly damages and losses. Situations where your rental property must sit vacant for extended periods of time can put a strain on your pocket. Let’s say that a thunderstorm rips through the area and severely damages your property. Or maybe your home is the victim of crippling vandalism.
Without anyone there to put in an immediate report, emergency response times may be delayed. This means that your home is at greater risk of severe damage. If the property has been unoccupied for more than 30 days, a non-occupied rental policy can cover those costs. This helps you make critical repairs without breaking the bank.
What does Landlord Insurance NOT Cover?
While having a landlord policy is great, it’s far from being a perfect foolproof solution. Realistically, there are some situations that insurance companies just won’t cover (no matter how much you plead with them). Familiarize yourself with these exceptions so you can plan around them appropriately, just in case.
Tenants Belongings
Most landlord insurance policies do not cover tenants’ personal possessions. These belongings could include items like their car, clothing, electronic devices, and anything else they brought with them to the rental property. Instead, landlords should encourage tenants to purchase renter’s insurance. Renters insurance helps tenants replace or repair their personal items in case they’re damaged or stolen.
Rental Property Maintenance
Landlord insurance typically does not cover normal wear and tear to the property. Any items that fall under the definition of property maintenance are not covered and are the landlord's responsibility. In order to keep your renters happy and receive good reviews, make sure you conduct regular maintenance to your property. As with all insurance policies, be sure to review what items are considered regular maintenance.
Since property maintenance is on your own dollar, it's important to screen your tenants well. With Apartments.com, you can view criminal history, eviction history, and credit reports to make sure you select a tenant that will care for your property.
What Factors into Landlord Insurance Costs?
You might be wondering, “how much is landlord insurance?”. While there is no exact estimate, the Insurance Information Institute states that landlord insurance usually cost 25 percent more than homeowners insurance. However, the true cost is more like a spectrum. The premium that one property owner pays can differ from that of another. There are so many factors at play that can determine how much you are going to spend on your insurance policy, such as:
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Whether your property is a short term or long-term rental
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Safety features, such as the security system and smoke detectors
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Age and condition of your property
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Number of rental units you own
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Location of your property (i.e., city and state)
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High risk features, such as pools, fireplaces, etc.
Additional Insurance Landlords May Want to Consider
Mother nature can wreak havoc when you least expect it. Oftentimes, location is the biggest factor in determining how vulnerable your rental property is to specific elemental assaults. Not only that, but you may also have to worry about crime. When a property is located in a high-crime area, it is usually more susceptible to acts of burglary or larceny. If any of this affects you, consider some of these extra coverages:
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Flood insurance
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Earthquake insurance
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Wildfire insurance
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Vandalism insurance
More Questions?
We know you that you may still have questions, so here are some common questions about landlord insurance coverage.
What’s the difference between landlord insurance and homeowner insurance?
If you want to convert your home into a full-time rental property, then you will need to purchase a comprehensive landlord policy. Comparatively, homeowner’s insurance is necessary if you are living in the home. Also, consider all the items that you possess. Homeowner’s insurance can usually take care of your personal belongings, but landlord insurance may only cover items that service the renters.
And most importantly, you can’t forget about liability protection. Landlord insurance is your best defense if you are found liable for a tenant’s injury. Meanwhile, a homeowners insurance policy can protect you and your family when an accident happens, regardless of whether you are at home or not.
Are landlords legally required to have landlord insurance?
There is no federal law that requires landlords to carry landlord insurance. But do not let that deter you from purchasing a policy. Protect yourself against all the unpredictable events that can happen at your property. From renter injuries to storm damage to burglary, the coverage you receive from a landlord policy is invaluable. We understand that not having to pay the cost of an insurance policy is tempting, but anything can happen—so don’t take that risk. In the long run, you will be glad you opted in.
Does landlord insurance replace a tenant’s rental insurance?
The short answer: no. Why? Landlord insurance policies do not typically cover a tenant’s personal belongings. If a tenant wants to protect their own items (clothes, car, electronics, etc.), then they will need to purchase separate rental insurance.
