Landlord Insurance

Here is why you need it

Landlord insurance protects rental property owners. Your homes, condominiums, or apartments that have been rented out to tenants will be covered by this policy. It also provides coverage when you need to sublet your property for a few months while you’re on a business trip.

Many people get confused at this point. They assume their standard homeowners insurance will also cover their tenant. However, their homeowners insurance policy was written to fit them and their unique risks, not those of their tenants. If your home is being rented out for the occasional short-term rental, your policy will typically still apply. However, as soon as you begin using your home regularly for commercial purposes, your standard homeowners policy no longer applies.

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Why is Landlord Insurance Important?

Landlord insurance protects you from financial losses caused by damages to the property; injuries to a person on the property, theft, and accidental damages caused by floods and earthquakes. Since it is your home, renters are not responsible for when appliances break down; when a guest suffers an injury on your property due to it being unsafe; or when perils like fire or burglary damage your property. Think of it this way — when you are renting out a home, you expose yoursef to higher risks. You have increased responsibility for accidents or injuries that might occur on your property, such as those of your tenants or your tenants’ guests. This is where landlord insurance comes to the rescue. It will happily protect your wallet from extra expenses. Landlord insurance comes in different sizes and shapes. So always do your research before you begin your hunt. Address your needs, reach out to different insurance providers and save more time and money!

Multiple coverage options on your fingertips.

Choose from various options and select the policy
that best suits your requirement.

Landlord Insurance Coverages 

There are various types of coverages and packages available on the market. Most common landlord insurance policies provide the following coverages:

Dwelling Coverage

Dwelling insurance covers landlord insurance and will cover the cost to rebuild or repair your rental property. Additionally, the policy includes liability coverages. There are three types of dwelling coverage, each more secure than the last.
  1. DP-1 Basic Policy
The DP-1 policy provides the most basic form of landlord insurance. It is an excellent small budget option for homes that can’t be insured due to their condition and is a perfect fit for older homes. The policy also covers protection against specifically mentioned perils such as fire, wind, and lightning.
  1. DP-2 Broad Policy
The DP-2 policy provides adequate coverage. It covers more perils than the DP-1 policy. Additional perils included in the policy are falling objects, pipe breakage, and water discharge to mention a few.
  1. DP-3 Special Policy
Out of all the policies, DP-3 offers the most comprehensive coverage and is the best coverage for landlords. This policy is similar to a homeowners insurance policy. It covers most of the perils already named in the previous policies in addition to vandalism and theft. It also includes liability coverage. For instance, your insurer will pay any medical expenses or legal fees if your tenant is injured.

Loss of Rental Income

Periodically, you will need to take your rental properties off the market to make repairs or other reasons. To cover any financial losses while your property is getting repaired, this coverage will provide you a temporary rental compensation. For instance, fire damage can cause a property to be closed for several weeks and the coverage would compensate you for those weeks of lost income.
what-is-landlord-insurance

Liability Coverage

Liability coverage comes to the rescue when you get sued for property damage of other people’s property or bodily injury of a tenant. This coverage protects you against prospective lawsuits and liability claims you may be responsible for as the homeowner. For example, Covered by SAGE shares that their liability coverage amount ranges from $100K to $500k and the coverage amount depends on the size of the house.

Additional Coverage

The above-mentioned coverages are commonly provided by insurers. Your insurance provider may also offer other forms of security as optional endorsements or core policies. Though add-on options might vary, there some additional coverages you might want to consider:

Building Code Coverage

If you own an older house or have yet to bring your house up to code, building code coverage will be your savior! Without the coverage, you would have to pay for all the expenses out of pocket to make the alterations.

Flood Insurance

Landlord insurance typically doesn’t include flood damage in the policy. So, if you live in a high flood risk area, you might as well consider buying a flood insurance add-on. It will cover the expenses of repairing or conducting maintenance on the property.

Earthquake Insurance

If you reside in a high-risk earthquake state, like Alaska or Hawaii, homeowners should consider purchasing earthquake insurance. Landlord insurance

Landlord insurance does not include earthquake insurance.

Non-Occupancy Dwelling Coverage

If your rental property has been vacant for more than 30 days, your insurance company might not cover any claims for the property. With non-occupancy dwelling coverage, it will help you extend your coverage for that time.

Emergency Coverage

As the name says, this coverage will offer you protection in emergency events. It’s for times when your tenant calls you to fix a broken pipe or they got accidentally locked out of the house. This added feature will cover some parts of the cost you incurred to travel to the property and solve the issue.

Multiple coverage options on your fingertips.

Choose from various options and select the policy
that best suits your requirement.

What doesn’t Landlord Insurance cover?

  • Basic Maintenance: You will be solely responsible if any equipment such as the dishwasher or AC breaks down. In other words, you will have to pay out of pocket for any maintenance costs.  
  • Tenant’s Personal Property: Your landlord insurance will not cover your tenants’ personal belongings such as clothing, equipment, or electronics. Your tenant is responsible for their property and will need to buy a separate renters insurance policy if they want coverage.  
  • Sewer and Water Backup: Your landlord insurance will not include it but it can be added as an endorsement.
how-much-does-landlord-insurance-cost

How much does Landlord Insurance cost?

The cost of your landlord insurance premium will depend on factors such as the size of the home, the location of the home, and the average maintenance and rebuilding costs in that area. Another aspect that may influence the price of your insurance policy also depends on the security measures you have in places such as motion sensors, smoke alarms, or theft alarms.

The Insurance Information Institute (III) shows that landlord insurance premiums are typically about 25% higher than homeowners insurance premiums due to landlord insurance providing more protection and coverage. Since the average home insurance cost in the US is $1,211 per year, landlord insurance could cost you over $1,500 as estimated by Coverage.

Personal aspects like your credit score and history of claims also contribute to your insurance rate. So, make sure to keep your numbers in check!

Differences between Homeowners Insurance and Landlords Insurance

Both of these insurance policies share some common similarities. Both policies include coverages for property damages and liability. But there are few key differences that set them apart. Homeowners insurance is only applicable to owner-occupied homes. It doesn’t include property rented out to tenants. Homeowners insurance also includes liability coverage but landlord insurance will have higher liability coverage limits. This is because landlords have more risk factors than homeowners. The main reason that sets landlord insurance apart is it usually includes loss of rental income coverage. Landlords rely on their rental property for income. So, if the building is damaged, the insurer will provide compensation to the lost income owner.

The Bottom Line 

Rental properties are a great way to make extra income. Although landlord insurance isn’t mandated by the law, it’s always a wise investment to purchase insurance to protect yourself against large and unforeseen expenses. Before you decide to rent out your property, make sure you know what your homeowners insurance policy covers. As discussed above, it won’t provide coverages for all damages and liabilities. If you want to secure your home and sublet it as well, landlord insurance is a must. Find an insurance agent near you today! 

Has this article been helpful to you? Leave a comment below and share your thoughts with us.

Multiple coverage options on your fingertips.

Choose from various options and select the policy
that best suits your requirement.

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