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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 landlord insurance covers
- What landlord insurance doesn’t cover
- Landlord insurance cost
- Frequently asked questions about landlord insurance
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 landlord insurance covers
The two primary coverage types of landlord insurance are liability and property insurance. Here’s a quick overview of each.
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 carriers can offer optional coverages separately, though.
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.
Further reading: An Overview of Loss of Use Coverage
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.
What landlord insurance doesn’t cover
While landlord property insurance covers many things, your policy doesn’t cover everything. Landlord insurance typically won’t cover the following:
- Tenant’s personal property: Though homeowners insurance covers personal property, a landlord insurance policy doesn’t. Your tenant will need to purchase their own renters insurance to protect items like their furniture and clothing.
- Shared property: If you live upstairs and rent your basement to a tenant, you may not qualify for a landlord policy. You typically must insure a non-owner-occupied unit to be eligible for landlord insurance.
- Maintenance: As the landlord, you’re responsible for maintaining the property. If the washing machine breaks down over time because of normal wear and tear, you’ll need to pay to repair or replace it out of pocket.
Again, you may wish to buy extra coverage through riders (add-ons) to your basic landlord policy. Some additional coverages you may want to consider include coverage for vandalism, building code repairs, burglary, and protection for when your rental property is undergoing construction.
Landlord insurance cost
Standard home insurances costs 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.
Frequently asked questions about landlord insurance
Here are the answers to some of the most commonly asked questions about landlord insurance.
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 (e.g., 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.
Renting out a property can be a lucrative source of income, but it comes with risks. Having insurance is a vital part of being a landlord. Just one destructive tenant could cost you thousands of dollars. Even if you have property insurance on your primary residence, you’ll need an additional policy to cover any rental units. Make sure you compare rates from multiple insurance providers to find the policy that meets your needs.
Disclaimer: All insurance-related services are offered through Young Alfred.