Insurance for Landlords: How to Protect Your Investment Property
Thursday, May 18, 2023
Investing in rental properties can be a lucrative venture, and it can come with its fair share of risks. When it comes to insuring property, there is a difference between being a homeowner and a landlord. If you rent a room in your primary dwelling, your homeowners policy may offer enough protection, but suppose you rent your primary residence for part of the year or own a full-time rental? In that case, you need to look into an insurance policy for landlords. In this article, we’ll explore the ins and outs of this type of policy.
Landlord Insurance vs. Homeowners Insurance
Landlord insurance differs from “regular” homeowners insurance in intent and degree of coverage.
A homeowners insurance policy is intended to protect your dwelling and your personal belongings for a home that you both own and live in. If you live in the dwelling full-time and only rent a portion of your space, your homeowners insurance will probably be all the coverage you need, but you might consider an endorsement for added protection.
Landlord insurance, also known as rental property insurance, landlord property insurance, or investment property insurance, is a type of insurance specifically designed for property owners who rent out their homes or investment properties and live off-site. There are further distinctions in short-term vs. long-term leases. A conversation with your agent will help you choose the best policy for your unique situation.
Having insurance specifically tailored to the unique risks of being a landlord is crucial because homeowners insurance typically does not provide adequate coverage for rental properties.
How Is Insurance for Landlords Different From Homeowners’ Insurance?
When you purchase homeowners insurance, you are looking to protect your dwelling and all of your personal belongings. Insurance coverage for your rental property must take into account that this is an income stream.
In a major disaster, you need to cover the dwelling and the items you own on the property; you also need to cover a loss of income. Most landlords require long-term tenants to obtain renter’s insurance to protect their personal belongings because rental property insurance does not cover those items. Bear in mind that a long-term lease is considered 6 to 12 months.
When is Landlord Insurance Necessary?
Landlord insurance is highly recommended for anyone who rents out their property – residential or otherwise. This includes if you own:
- a single-family home
- an apartment or condo complex
- a commercial property
While it is an additional expense, a landlord insurance policy is a worthwhile investment considering the potential financial losses you could face without proper coverage.
What Does Landlord Insurance Cover?
Landlord insurance covers a variety of incidents that can occur in or on your rental property. Some of these coverage components are standard in most policies, and some can be added to fit your specific needs.
|Coverage Component||What’s Covered?||Policy Inclusion|
|Property Damage||Dwelling, other structures, and personal property used to service the rental.||Standard|
|Liability Protection||Medical bills or legal expenses for another person injured on your rental property.||Standard|
|Loss of Rental Income||Financial loss related to rental income if the home becomes uninhabitable or failure of the tenant to pay rent.||Standard or Optional|
|Burglary||Reimbursement for stolen property within the rental owned by the landlord, like the stove, microwave, etc.||Optional|
|Vandalism||Damage done by intentional acts on the property.||Optional|
|Under Construction or Non-Occupied Dwelling||Damage or loss of a home that is uninhabited.||Optional|
|Building Codes||The need to bring things like HVAC, plumbing, or electrical up to code to meet current building standards.||Optional|
Assess what risks your rental property faces in order to determine the coverage components you need. Remember that coverage can vary based on your insurer and selections, so be sure to read your landlord insurance policy carefully to understand exactly what is covered.
How Much Does Insurance for Landlords Cost?
Is homeowners insurance cheaper for a rental property? On average, rental property insurance is about 25% higher than basic homeowners insurance. In the U.S., landlord insurance costs $1,288 per year on average. However, the cost can vary depending on the coverage limits you choose as well as the property’s value, location, age, size, crime risk, environmental risk, and other factors.
There are many additional risks when renting your property, and insurance companies are well aware of the higher frequency of claims on income-producing investments. They have set rates for coverage, and you should expect higher costs as a result. There are a few calculators available for estimating insurance on a rental property, but your best course of action is to discuss your situation with your insurance agent. Every property is different, and Independent Insurance Associates is there to help you determine the best way to protect your assets.
What About AirBnB or VRBO Coverage?
The major players in the short-term hosting industry do offer insurance policies. Be aware that most of those policies are in addition to your homeowners or landlord insurance, not a replacement for your regular protection. Read the fine print and research other hosts’ experiences to see if these added protections are necessary for you.
Obtaining a Landlord Insurance Policy
If you’ve determined that getting a landlord insurance policy is the best fit for you, it’s time to find a policy. You should:
- Research and compare providers. Choose an independent insurance agent to help compare companies and policies.
- Request quotes and coverage options. Knowing your coverage needs can help you get an accurate estimate of how much your premiums will be.
- Provide property information. Apartment buildings, non-owner-occupied residential homes, and industrial properties all have different coverage needs.
- Evaluate coverage and premiums. Select the price point and level of coverage that you are comfortable with.
Independent Insurance Associates has years of experience helping investment property owners choose the right insurance for landlords. We are here to help you understand the nuances and risks involved in renting the space you own. Contact us if you already have or are planning to add this type of income stream. We will help you find the best insurance scenario for your particular needs.