Landlord Insurance

Stay Covered When You’re not Home

Landlord insurance protects rental property owners. The policy will cover your homes, condominiums or apartments, rented out to tenants. It also provides coverage when you to need to sublet your property for a few months while you’re on a business trip.  

Here is where many people think its confusing. 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. Typically, your policy is still applicable for occasional short-term rental too. However, as soon as you begin using your home regularly for commercial purposes, your standard homeowners policy no longer applies. Therefore, a landlord insurance is a must!

In this article

Why is Landlord Insurance Important?

Landlord insurance is for protecting you from financial losses resulting from damages to the property; injuries to a person on the property; theft; and accidental damages caused by flood 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, exposure to risk is high. 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 policy 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!

Landlord Insurance Coverage

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

Dwelling Coverage

Dwelling insurance will cover the cost to rebuild or repair your rental property. Additionally, the policy includes liability coverage. 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 coverage. It is a good 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.

2. DP-2 Basic 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.

 3. DP-3 Basic 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, if your tenant gets an injury, your insurer will pay any medical expenses or legal fees in case your tenant is injured.

Loss of Rental Income

Periodically, you will need to take your rental properties off the market to make repairs or for other reasons. To cover any financial losses while your property is being 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.

According to Steady, this coverage is included as part of the standard landlord package from some insurance companies and other companies provide it in separate policy under the name “rent loss insurance”. Always clarify with your provider what different policies are included in a company’s package.

If you are a new landlord, and don’t know where
to start your journey, we have your back!

Liability Coverage

Liability coverage comes to rescue when you are 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. For instance, State Farm offers coverage for tenant move-back expenses, which are the moving fees incurred if you have to temporarily move your tenant out of the home in order to repair the property.

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.

what is landlord insurance

Earthquake Insurance

If you reside in a high-risk earthquake state, like Alaska or Hawaii, homeowners should consider purchasing an earthquake insurance. Similar to flood insurance, earthquake insurance is also not included in the landlord 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 it, 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 accidentally lock themselves 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.

If you are a new landlord, and don’t know where
to start your journey, we have your back!

What Landlord Insurance doesn’t cover?

Just as it is crucial to know what your insurance policy covers, it’s also important to know what it doesn’t 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: they won’t be added to your landlord insurance policy automatically, but can be added to it as an endorsement.

how much does landlord insurance cost

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 has damages, the insurer will provide compensation to the owner for the lost income.

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 will cover. 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.

If you are a new landlord, and don’t know where
to start your journey, we have your back!