Even when homeowners and landlords own similar properties, their insurance needs differ. Homeowner’s insurance doesn’t cover rental properties, and most policies specifically deny coverage when the owner isn’t occupying the unit. If a rental property experiences fire, burglary, a natural disaster, or another calamity, the landlord—not the tenant—will be financially responsible. Consequently, every landlord needs reliable landlord insurance.
A basic landlord insurance policy won’t cover as many perils as homeowners’ insurance and will have a higher price tag. Short-term leases will have the most expensive policies since temporary renters are less likely to report damage and care for the unit appropriately. Prices will also vary based on location, age of the property, and other factors.
So, what should a property owner look for in a landlord insurance policy? Since there are many types of landlord insurance, consider the specific risks you need your policy to cover. But every high-quality landlord insurance policy should encompass at least these three factors:
Property Damage—Property damage covers destruction caused by natural disasters, fires, gas or electrical malfunctions, and vandalism. Typically, a policy that pays the replacement cost rather than the cash value or a predetermined lump sum will offer the best protection.
Lost Rental Income—This coverage won’t cover lost rental income due to ordinary vacancies or a tenant’s failure to pay. But if a rental property becomes uninhabitable through no fault of the landlord, coverage provides temporary rent reimbursement while the property is unoccupied.
Liability Protection—Legal and medical expenses could add up quickly if a tenant or guest gets injured on your rental property. Liability protection is essential to cover costs in the event of a lawsuit or other form of legal responsibility.
In addition to these primary forms of coverage, many riders or supplemental policies may be available. For example, landlords relying on a steady cash flow might appreciate guaranteed income insurance, filling the gap if a tenant fails to pay rent. Flood protection might be a wise investment if your property lies in an area prone to flooding. Coverage for construction expenses might be wise for older properties since it covers bringing a building up to code after it sustains damage.
Keep in mind that landlord insurance covers only the main property, adjunct buildings, and any items left on the property for maintenance or your tenants’ use. It doesn’t cover your renters’ personal property. Recommending that your tenants purchase renters’ insurance can ensure their property is well protected.
Finding the right insurance carrier will minimize the risk of unexpected losses on your rental property and keep you from overpaying for coverage.
About Rentals America
Rentals America provides full-service property management for residential rental properties. Our team is wholly dedicated to property management, and we’re here to help landlords navigate the rental market.
