Landlord insurance presents a wide range of coverage for property owners with one or more rental units. It is important that you have protection against any financial loss that may occur.
There will surely be a number of unforeseen events that will be out of your control — that’s where landlord insurance comes in. It will offer a span of protection not usually provided by other types of homeowners insurance policies.
What Does Landlord Insurance Cover?
Depending on which insurance company you use, landlord insurance will cover most or all of the following:
- Property damage: Any damage to your property caused by natural hazards, vandalism, theft, burglary, or tenants and/or their guests will be covered.
- Liability: This will protect you against any liability claims and lawsuits. A legal dispute is always a possibility in the rental business. If someone is injured on your property, whether it be a tenant, visitor, or trespasser, you are liable for multiple expenses. Medical payments, funeral costs, legal fees, and judgment and settlement costs may all be charges you have to deal with. Landlord insurance will help cover these costs. In addition to that, if you are found responsible for causing damage to a property, you will be covered as well. So, for instance, if you are found guilty of not fixing a leaky water pipe and mold destroys a tenant’s possessions, you are protected from the messy lawsuit that may follow.
- Loss of income: Landlord insurance will help compensate for any loss of income due to property damage or tenant negligence. If your property becomes uninhabitable for any reason, this kind of coverage will reimburse you for the money you would have been making by collecting rent. the case of a tenant failing to pay rent.
- Optional coverage: There are also many ways that you can customize your policy. You may purchase additional coverage such as rent guarantee insurance, natural disaster insurance, employer liability insurance and landlord contents insurance to cover your personal possessions within the property, like furnishings, decorations, and flooring.
Do I Need Landlord Insurance?
It is not mandatory by law for you to purchase landlord-specific insurance. However, obtaining it would be a smart choice in the long run, considering all of the benefits it can bring you. Also, being that it is an investment expense, your landlord insurance policy premium would be tax deductible. If you are renting out your property momentarily, through mediums like Airbnb or Stayz, or if you do not occupy the same property as your tenants, then you have every incentive to purchase landlord insurance. Many landlords often rely solely on homeowners insurance and do not realize that they are not protected from every hypothetical.
As mentioned previously, one of the most prominent reasons to obtain landlord insurance is to protect themselves, their property, and their tenants from an unforeseen emergency. For more information on how to prepare for emergencies, look at this guide.
Landlord Insurance vs. Homeowners Insurance: What’s the Difference?
Landlord insurance and homeowners insurance may sound like they’re the same thing, but they are not. Homeowners insurance does not account for the losses associated with collecting rent. Owning a home is a lot different than owning one and renting it out. There are many more liability issues that go along with being a landlord, which is why obtaining insurance for it is so important.
How Much is Landlord Insurance?
The cost of landlord insurance depends on a number of components. Some policies may range from as low as $500 per year to thousands of dollars per year. Here are the factors considered in landlord insurance pricing:
- Number of rental units you own
- The size of the unit(s)
- Location and potential risks (such as certain natural disasters)
- The age and condition of the structure
- The status of electrical wiring and fire sprinklers in the property
- Whether or not you allow smokers to rent from you
- Whether or not the property has gated access
- Whether or not you have burglar alarms installed
- The presence of a swimming pool or lack thereof
- The type and amount of coverage you are looking for
What to Consider
If you are thinking about obtaining landlord insurance, there are many things you should look for when assessing different policies.
Q: What level of insurance do you want?
This depends on the type of property you have. As mentioned before, many different factors play into the pricing of policies. It is important to know exactly what you are looking for prior to purchasing a premium. For instance, there is no need for you to obtain a policy with contents insurance if your property does not come furnished.
Q: What risks are your property prone to?
If your home is in an area susceptible to hurricanes, floods, or fires then landlord insurance is a great way of preparing. You should identify if your property is in a flood zone, for instance, so you can make sure that you are getting the coverage you need.
Q: Is your unit pet-friendly?
Some policies protect your property against damages caused by pets and some don’t. If you allow pets on the property, then it’s probably a good idea to look for insurance that covers any of Fluffy’s potential messes.
Q: What kind of damage does the policy cover?
Read over the policy’s terms very carefully. Sometimes they will only cover accidental damage or malicious damage. Sometimes they will only cover theft. Even if you’re sure that your tenants are reliable, there is always the possibility for problems to arise. You never know how their guests might act or who may be lurking in the shadows — with insurance, you’ll never have to worry.