How Does Landlord Insurance Work?

According to Nationwide.com, there are more than 11 million landlords in the U.S. and they carry a lot of responsibility in terms of managing their properties. There’s so much more to being a landlord than just renting out your property and finding solid tenants. In fact, landlords have to stay on top of maintenance concerns and overall upkeep of their properties. Landlords have to worry about a lot of things going wrong such as a storm causing damage, a flood, or vandalism. Thankfully, there are different types of landlord insurance available that could cover loss of rental income in certain cases. You might not know how to go about this, but don’t worry because we explain how landlord insurance works below. 

What is Landlord Insurance? 

Landlord insurance, sometimes referred to as rental property insurance, provides property and liability coverage that protects landlords in the case of property damage or a tenant getting hurt on your property. Some landlords may think a standard homeowners insurance policy will cover everything that could potentially happen, but this is limited coverage and a good reason why you should cover all of your bases. 

What Does Landlord Insurance Cover?

Landlord insurance is usually broken down into three types of insurance for homeowners or you can invest in a comprehensive plan. The first one is landlord property protection, which typically covers damage to the physical property. This type of insurance covers damage due to a fire, earthquake, natural disaster, gas malfunction, and certain types of criminal activity. Also, this policy tends to cover additional building such as a fence, detached garage, or a shed. If you have equipment on your property for maintenance purposes such as a lawn mower or a leaf blower, this will be covered as well. 

The second type of insurance landlords should consider investing in is landlord liability protection. Let’s say someone gets hurt or injured on your rental property, there’s a chance you may be responsible for legal expenses and/or medical bills. Landlord liability coverage could help you pay for these unexpected expenses depending on your specific policy limits. Plus, you usually don’t have to pay for a deductible with landlord liability insurance. 

The third type of insurance is rental income/rental default insurance, which typically covers loss of income. If something extreme happens to your property such as a tornado, termites, a sinkhole, mold, etc., this insurance will provide temporary rental reimbursement to help you cover rent while the situation is being fixed. Look into the specific policy to make sure it covers all of your needs since every company is different. 

What Doesn’t Landlord Insurance Cover?

Landlord insurance doesn’t cover things such as tenant’s belongings, maintenance breakdowns such as a furnace or a dishwasher, and shared property. It’s highly recommended that you encourage your tenants to get renters insurance to cover their belongings in the event of a crisis. Certain problems are usually excluded from landlord policies including erosion, mudslides, acts of war, asbestos removal, neglect, volcanic activity, and water damage due to a sewer or drain backup. 

Additional Coverage to Consider

Most landlord insurance policies offer additional coverage options that cover a wide range of things. Some of these include vandalism reimbursement, burglary coverage, flood insurance, and repair costs to maintain building code standards. Other types of coverage that could be worthwhile include debris removal, collapse of property, fire department service charge, and damage to plants on your property. Talk to a landlord insurance agent to discuss these additional options to figure out what will best fulfill your needs. 

How Much Does Landlord Insurance Cost?

Landlord insurance costs depend on the specific policy, the insurance company, and the landlord’s needs. Certain factors affect landlord insurance policy such as the age of the home, square footage, type of home, additional structures, if your area has a high vandalism rate, and the frequency of disasters in the region. According to the Insurance Information Institute, landlord insurance can cost 25% more than a homeowner’s policy. The average landlord insurance policy typically costs $2,317. A landlord insurance quote also depends on the cost of potentially rebuilding your property if it were to be destroyed or damaged during a crisis listed above. If the amount to rebuild your property turns out to be expensive, then you should expect your insurance policy to cost more. 

Conclusion

Being a landlord takes a lot of work, time, and resources in order to be successful. Don’t assume that a homeowners insurance policy will protect you in the case of disaster or some other emergency that happens out of the blue. Look into landlord insurance and find out what’s best for you and your needs. Landlord property protection, landlord liability protection, and rental income/rental default insurance would cover most of your bases. However, there are additional options you can bundle with your policy such as vandalism reimbursement or flood insurance. Landlord insurance is more costly than homeowners insurance, but is worth the investment. If you want to be prepared for the worst-case scenarios when it comes to your properties, look into landlord investment so you can continue to flourish for years to come.

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