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Individual landlords own nearly 72% of all the rental properties in the U.S., according to Pew Research Center. Owning rental property comes with certain advantages, including monthly income. But being a landlord also means you have responsibilities, such as ensuring you have enough landlord insurance to protect your investment.
If you’re a rental landlord or thinking about becoming one, here’s what you should know about landlord insurance:
- What is landlord insurance?
- What does landlord insurance cover?
- Landlord insurance vs. homeowners insurance
- Landlord insurance cost
What is landlord insurance?
Landlord insurance protects the owners of rental homes, condos, or apartments. Many landlords are private property investors who make money from rental fees. Landlord insurance helps them protect their investment in the structure of the home they rent out.
In some cases, the landlord may also live on the property, making it an owner-occupied building. In that case, the landlord may not be able to get landlord insurance, depending on the size of the property. For example, homeowners insurance can usually cover renting a room (or floor) of a house. However, home insurance is not for an apartment building with many individual units.
What does landlord insurance cover?
The two primary coverage types in landlord insurance are liability and property insurance. Here’s a quick overview of each element.
Landlord liability insurance
Although a tenant’s insurance covers their liability, a landlord owns and maintains the property. Landlord liability insurance helps pay for legal fees and medical bills related to a personal injury that is the landlord’s fault.
For example, let’s say that the patio is old and collapses while the tenant’s standing on it. Landlord liability would pay for the tenant’s and or their guest’s medical bills and property damage. If the landlord gets sued for the collapse, their insurance could pay for all legal costs.
Landlord property insurance
Landlord property insurance covers the structure of your house and any detached structures like a shed. Detached structures get covered at 10% of your total dwelling coverage amount.
You might think landlord insurance covers all the same perils as a homeowners policy. But this kind of insurance is more limited. You’ll need to add landlord insurance endorsements if you want comprehensive property coverage. Usually, covered losses include:
- Fire, Smoke, and Lightning
- Sudden and Accidental Water Damage (not if it is related to poor maintenance or age)
- Weight of Ice and Snow
- Falling Objects
- Vehicle Damage
- Wind and Hail
Often, landlord insurance doesn’t cover theft or vandalism to the property. A landlord policy also won’t help pay for building code upgrades. Most insurance companies can offer optional coverages separately, though.
Additional coverage like flood and earthquake damage also is excluded. Instead, you’ll have to buy individual policies for that. Often, these policies come from government agencies (like the National Flood Insurance Program or the California FAIR Plan). Some areas, like Florida, may require separate hurricane insurance as well.
Landlord insurance protects both the main structure of the house and any detached buildings. For example, a gazebo in the backyard or a detached carport is a detached building.
Loss of rental income
Let’s say your property gets damaged enough that your tenants can’t live there. Loss of rental income insurance will help cover rental earnings while tenants are away. Most policies include this extra coverage, but you’ll want to double-check for restrictions. For example, if you decide to renovate and upgrade the home, that might not qualify.
Claims property valuation
Landlord insurance comes with replacement cost valuation (RCV) for the dwelling. That means you get the total value of rebuilding or repairing your property without depreciation. Your deductible will apply, however.
If you need landlord insurance and aren’t sure where to start, Credible (powered by Young Alfred) can help.
Landlord insurance vs. homeowners insurance
Here’s a quick run-through of the differences between a homeowners and a landlord policy:
- Personal belongings. Landlord insurance coverage doesn’t include personal property. However, it can cover appliances used by the tenant (i.e., a refrigerator). In comparison, homeowners insurance generally protects everything inside the house.
- Liability. As a landlord, you’re liable for damage related to your property (i.e., upkeep and maintenance). Homeowners liability covers any injuries that happen on and off the property.
- Loss of rent. Landlord insurance covers rental income losses during repairs (usually after a natural disaster). This coverage is irrelevant to homeowners and not included in a home insurance policy.
- Additional living expenses. Homeowners insurance pays for living expenses if the owner must move out during repairs (usually after a covered disaster). Landlord insurance doesn’t include this coverage.
Landlord insurance cost
Standard home insurances cost around $1,272 per year in the United States, according to the National Association of Insurance Commissioners. Landlord insurance, though, is often about 25% higher than home insurance, largely due to the risk of liability and damage from tenants. That said, there’s almost no data on the average price of landlord insurance, so it’s hard to provide specifics.
Landlord Insurance Frequently Asked Questions
Does renters insurance cover damage to the landlord’s property?
No, it does not. Renters insurance protects a tenant’s belongings but does not extend to the property itself.
Can a landlord require renters insurance?
Yes, many landlords require renters insurance to help mitigate potential liability. If someone gets hurt and the tenant doesn’t have insurance, the landlord might have to pay.
How much renters insurance should a landlord require?
Only liability coverage matters for the landlord. Most renters policies offer $100,000 for liability protection, which is often enough.
Do I need landlord insurance?
If you plan to rent a property, yes, you do. You don’t need a separate policy if you’re renting a room or offering a short-term rental within your home (i.e., an Airbnb). However, if you don’t live on the premises, you need landlord insurance.
Learn more: How to Buy Homeowners Insurance
What does landlord additional insured mean?
You should have tenants name you as an additional insured on their renters insurance. Doing this protects your liability as a landlord. This term means you’re listed as part of their policy. This designation protects you from legal fees and damages from your tenant’s activities.
For example, if a tenant hosts a party and someone hurts themselves, their policy pays, not yours.
Another reason to be added to your tenant’s renters policy is that if you must file a liability claim on your landlord policy, it goes against your insurance score. That impacts your insurance rates and ability to get landlord insurance in the future. If your tenants file the claim, it goes against their insurance score instead.
Disclaimer: All insurance-related services are offered through Young Alfred.