Looking to Rent Your Property? Here’s What You Need to Know About Landlord Insurance
Being able to rent out a home you’re not using for all of the year or even part of the year is undeniably a great way to make some money. It’s also a great way to lose money if you don’t have landlord insurance.
Not to be confused with homeowners insurance, which only covers the house and property while the owner(s) are living there, landlord liability insurance will provide coverage for when the property is being rented. This is the most crucial difference between the two kinds of home insurance and landlord home insurance. Other than that, landlord insurance will cover many of the same things covered by regular home insurance—with a few caveats.
Let’s get into them here so you can get a fuller understanding of landlord property insurance, what it covers, and if it is something you need.
Landlord Insurance: What Does It Cover?
As mentioned, a landlord insurance plan will cover many of the same things your regular home insurance will cover. For instance, it protects your property in the event of a fire or storm. But landlords also face singular challenges that regular homeowners don’t encounter. We’re talking about risks like loss of rental income or injury liability.
These added perils make rental properties more expensive to insure. As a result, landlord homeowners insurance policies are up to 25% more costly than homeowners insurance. On the other side of this expense, however, is the substantially more off-putting fact that if you are renting out your home and do not have landlord home insurance, you may be denied coverage by your homeowner’s insurance when you need it the most.
The Types of Landlord Insurance Coverage
Like all insurance, a landlord rent insurance policy is subject to limits and deductibles that will vary from one provider to the next. This said, there are some coverage options that most landlord insurance policies offer under their standard plans.
These options include:
- Dwelling Coverage. This is a critical part of your landlord insurance policy. Your landlord house insurance will usually cover the structure of your home or building against certain risks like fire, wind, hail, storms, and lightning. If, for instance, if a windstorm takes down a tree on your roof, your landlord household insurance will cover it.
- Coverage for Other Structures. If you have a detached structure on your property, like a fence, garage, or shed, then this coverage is essential in case these structures are damaged. If you don’t have any other structures, however, you’re good to drop this coverage.
- Liability Protection. As a property owner, you’re responsible for whatever happens on your property—even though you’re not living there. This means if a tenant falls on the front steps of your house, they can sue you. Thankfully, liability insurance covers this, helping to pay for accidental injuries and medical expenses.
- Personal Property Related to Property Maintenance. This sort of landlord insurance won’t apply to everyone, but if you leave any of your personal property used to maintain the property you are renting at the property you are renting (like a lawnmower, any tools, security cameras, etc) then personal property insurance can protect you in the event these items are damaged or stolen.
- Loss-of-Use Coverage. Not every landlord gets loss-of-use insurance, but it can provide financial relief in the event your rental cannot be inhabited due to a covered risk. For instance, if a tenant has to relocate for a month while you complete repairs due to a fire. Loss-of-use coverage will pay that month’s lost rent, so you can carry on as usual.
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Here's Why You Need Landlord Home Insurance
You can’t assume nothing will go wrong, even if you have dream tenants and your property is in a place with mild weather and low crime rates. Life is full of surprises. As soon as tenants move into your home or building, regular home insurance is no longer enough. Any large appliance malfunction, theft, no-fault accident, or natural disaster that happens that impacts your home is your responsibility, and you are left to foot the bill.
Is There Anything Landlord Liability Insurance Does Not Cover?
Since the main purpose of landlord insurance is to cover you, the landlord, it doesn’t cover what your tenant brings with them. This means if your client’s jewelry, TV, furniture, and car are stolen, then that’s on them—not you. For this reason, you should encourage your tenants to get tenant insurance.
Landlord home insurance also doesn’t cover repairs. If your furnace stops working or your water heater breaks down, then you have to pay to have them fixed.
We understand that landlord house insurance is an added expense, but when you consider all that could go wrong when owning a rental property, it’s better to think of it as an investment in your investment.
What is the Cost of Landlord House Insurance
As we’ve already mentioned, landlord insurance can be up to 25% more expensive than homeowners insurance. The reason is simple: tenants don’t treat your home as well as they would their own home. As a result, some tenants are more negligent, leaving your home more susceptible to fires, break-ins, and other accidents.
Tenants are also more like to litigate for slips or falls. If they lived in their own homes, they wouldn’t sue themselves, but they might sue you.
In other words, you need landlord liability insurance.
The Takeaway: Who Needs Landlords Insurance? YOU DO!
If you are renting out a property, you need some kind of landlord home insurance. Without it, you will be left paying heft sums out-of-pocket for accidents as well as major and minor disasters that would have been covered had you just got a landlord insurance quote.
And a quote is a place to start. Don’t assume the insurance provider that does your homeowner insurance is going to give you the best landlord insurance. By all means, get a quote from them too, but also shop around and get quotes from at least three other providers.
Our landlord insurance quotes feature quotes from the top providers in this niche insurance market, so you can request a quote here and know you are getting the best prices and the most reliable coverage.
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This said, unless you are buying the property to rent it out—in which case, your mortgage provider might require you to have landlord insurance before they will provide financing—you do not legally need it.
1. Make sure your property is in good condition. The better condition your property is in, the less likely you are to make a claim. This can bring down the cost of your premiums.
2. Add security. Cameras, locks, and gates may reduce the likelihood of your having to make a claim, thereby lowering your rates. Put them up to bring down your premium.
3. Consider your coverage. The more coverage you have, the more you pay. You definitely need some coverage, but you can also cut coverage you don't require. For example, if you're not leaving personal maintenance equipment on-site, you don't need the expense of personal property related to maintenance insurance.
Homeowners insurance covers the home itself and what's in the home, while landlord insurance covers the structure as well as what is outside of the home, like sheds, fences, and garages. Landlord insurance does not cover the belongings of tenants inside the home or building.
Then there's the scope of liability. Landlord insurance usually only covers liability related to the rented premises. Homeowners insurance, on the other hand, will often cover you and your family who reside in the home. It doesn't matter if the accident happens in your home.