Guide to Landlord Insurance

If you own an investment property or plan to rent out your primary residence, you need a landlord insurance policy. Landlord insurance policies not only cover the property in cases of loss, but they can also protect property owners against losses to buildings, personal property, and liability because of injuries on the premises.
By Eric H.
Updated Jul 1, 2021
guide to landlord insurance
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If you own an investment property or plan to rent out your primary residence, you need a landlord insurance policy. Landlord insurance policies not only cover the property in cases of loss, but they can also protect property owners against losses to buildings, personal property, and liability because of injuries on the premises. This post will explore what landlords need to know when evaluating landlord policies.  

Understanding the Basics

As a landlord, it can be hard to keep an eye on everything, especially if you juggle more than one property or have a full-time job separate from your role as a landlord. So the first thing you need to determine is whether you own the structure or just the interior space.

If you have a single-family residence, you are responsible for the structure of the home and the yard; a standard home insurance landlord policy will work for your situation, with options for extra coverage.

If you are renting out a condo or a townhome, you don't want to overpay for your landlord policy. Many townhome and condo communities have "blanket" insurance policies that cover the roof, the common areas, and the exterior of the building. Each community has its own rules and regulations; be sure to check with the management company and get all the coverage information in writing. If you're working with a seasoned insurance agent who's familiar with the area, they can help you locate all the necessary documentation. 

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Insurance Policy Coverage

The type of home insurance plans your mortgage lender requires will vary from state to state, but most comprehensive policies cover dwellings (structure), loss of rental income, and liability. 

Dwelling Coverage

Dwelling coverage can help pay for all the damages that occur to your home, condo, or apartment after a fire or high-damage storm has happened. This includes repairs from lightning strikes, wind damage, and hail storms as long as they appear as covered losses under the insurance policy. Note that you may need to purchase an "other structures" policy or rider if you have a detached building, storage shed, or fence. 

Loss of Rental Income Policy

What happens if your property becomes uninhabitable? A loss of rental income policy provides reimbursement to cover the rent money you would have received. Your lender probably requires this type of insurance if you have a mortgage on the property, but don't assume it's part of the standard policy. Before you give a tenant keys to your property, check the policy and make sure it includes loss of rental income. 

Liability Policy

If you're looking for insurance protection, make sure your property has 100% coverage from a liability policy and that the amount is adequate for your area. This way, if someone gets injured on the premises because of an icy walkway, faulty garage door, poorly lit staircase, or dog bite from the tenant's dog (all of which are unfortunate but common occurrences), the insurance policy will cover the payout in cases of lawsuits. 

Optional Insurance Coverages

Once you've verified that your landlord insurance policy has dwelling coverage, loss of income, and adequate liability coverage, consider these optional coverages to protect your assets:

Umbrella Policy

Umbrella policies can be beneficial, especially when it comes to rental property. For example, suppose your tenant hosts a party at home and a guest accidentally trips and injures themselves on an uneven sidewalk or patio paver. If that were to happen, they could sue the property owner for medical bills. An umbrella policy can cover those costs up to $1 million (usually more).

These insurance policies are helpful in situations where costs or damages exceed the liability coverage limits of the main policy. Even though these circumstances might not happen every day, they could come into play without warning — and an unexpected lawsuit is one expense no investor should risk. 

Vacant Property Policy

Will your property be vacant for more than 30 days at a time? If someone intentionally damages your property while it's uninhabited, you could use vandalism and mischief coverage to help pay for the repairs that insurance covers. Policies vary by company, and coverage can come with flexible options to convert vacant property policies to landlord policies; be sure to ask about your options. 

Personal Property Policy

Did you know that your landlord policy does not cover your tenant's belongings? And in some cases, general policies won't cover your personal property, like appliances, yard equipment, or furniture. Always recommend that your tenants get a renter's policy, and scan your policy for notes about your personal property coverage. If the main policy does not have one, ask for a rider or additional coverage. 

Flood Insurance & Water Damage Policy

While most good landlord insurance policies are fairly comprehensive, these policies rarely include flood insurance. Note that there can be a significant difference between an owner-occupied home and a rental home in the event of flooding.

Flood insurance covers the actual cash value of your property instead of replacement cost, so you're less likely to have any issues with rebuilding after experiencing damage from natural disasters such as floods or hurricanes.

Landlord insurance can help ease the financial burden in cases of storm damage, a leaky roof, or a burst pipe, but water damage policies differ between carriers. If water damage happens because of tenants who intentionally cause damage, your insurance claim may be denied; this means you'll need to file a civil suit or claim the security deposit for damages. Don't forget to ask about sewer backups or septic coverage. 

Maintenance Issues 

Most landlord insurance does not cover standard maintenance. If the HVAC unit breaks and needs replacing or an appliance malfunctions, you'll need to use savings or credit for repairs and replacements. Certain home warranty companies will provide home maintenance plans for landlords, but the fine print is extensive. Be sure to read all the details before purchasing a landlord home warranty. 

Vacation Rental Policy

If you choose to rent out a home for part of the year or rent it as a vacation rental, a second home's insurance policy may not cover damage that occurs while there is a tenant. Depending on the situation, some insurers may require you to purchase an entirely separate insurance policy when you own a vacation rental, even if you stay in the property for part of the year. If you need information about insuring a vacation rental property, read our home insurance on a second or vacation home article. 

Savings on Landlord Insurance 

Landlord insurance is typically more expensive than a homeowners insurance policy. Be sure to ask your carrier about these options for discounts: 

Safety & Liability Discounts

Safety features can reduce the risk of theft or fire damage to your home, and certain ones can mitigate damages. With this in mind, these safety and liability features may reduce the premium:  

  • Fire extinguishers and smoke alarms 

  • Security systems

  • Impact-resistant roofing materials

  • Property location, such as close to a streetlight or fire hydrant

  • Sewer connection (as opposed to septic in a rural area)

Bundling Discount

You can save on premiums by bundling your insurance needs with the same provider. By doing so, you may also feel it is more convenient to manage all of them. And if you have a rental property in several states, opt for a national provider who can give you a bundling discount. 

Final Notes

Choosing landlord insurance isn't easy, but the right information can help you know which policies provide maximum coverage. Your risk of being sued increases as a landlord, so it's important that you find the insurance that provides the best coverage possible. PolicyScout makes it easy to do your research on homeowner's insurance. Contact us today for more information or a quick, easy quote.