When converting a home into a rental property, obtaining landlord insurance should be one of the first items on your to-do list. Whether the home is being used as a primary residence or a vacation getaway, having this protection is vital for your rental business.
Landlord insurance can shield you from financial losses and provide peace of mind when dealing with your rental property, but the truth is, things happen. Whether there’s a natural disaster or renter-caused damage, having coverage can save you stress in the long run.
In this article, we’ll dive into the essentials of landlord insurance—what it covers, how it works, and why it’s a vital part of effective property management. Here's a sneak peek of what’s to come:
- Why landlord insurance is important
- What landlord insurance covers
- What landlord insurance doesn’t cover
- What factors go into landlord insurance costs
- Additional insurance coverage to consider
Why Do I Need Landlord Insurance?
Landlord insurance is a smart investment, offering extensive protection against property damage, financial losses, and liability risks. Over time, it can save you significant money by covering unexpected expenses. However, it’s important to remember that insurance policies aren’t one-size-fits-all.
The coverage you need will depend on the type of rental property you own. Whether you’re turning your home into a short-term vacation rental or leasing it as a tenant’s primary residence, having the right insurance tailored to your specific rental situation is crucial. It’s important to get the coverage that fits your needs and safeguards your investment.
What Is Landlord Insurance and What Does It Cover?
Think of landlord insurance as a safety net. Whether it’s property damage or a renter getting injured on your premises, this coverage can step in when you need it most and protect you from financial losses.
Many insurers offer customizable policies, allowing you to tailor coverage to suit your unique circumstances. However, all customizations or add-ons aside, most standard landlord insurance policies will provide the following coverage:
Property damage
No one wants to see their rental home damaged, but sometimes destructive situations happen. In many ways, landlord insurance is similar to homeowners' insurance. It can cover damage caused by natural elements like wind, lightning, or fire. Standard policies typically cover:
- Fire and smoke damage
- Storm and wind damage
- Theft and vandalism
- Electrical or plumbing damage due to covered perils
Landlord insurance will cover the rental property along with any other structures on the premises. Some policies also include coverage for personal property left for tenant use, such as appliances, furnishings, and maintenance equipment.
Liability
Accidents can be scary, especially if they involve tenants on your own property. From tripping down the stairs to burning themselves in the kitchen, if a tenant sustains an injury, they may sue you. While the safety of your renters is of utmost importance, these situations can put you at great financial risk.
Luckily, landlord insurance provides liability coverage in case your tenant or a visitor is hurt while on the property. Many policies even cover medical expenses for injured guests. Instead of navigating the complexities alone, let your insurer handle the situation and resolve disputes on your behalf.
Loss of rental income
Severe damage to your property can make it unfit for renting, bringing your rental income to a sudden halt. This is where landlord insurance can be a lifesaver.
A well-chosen landlord insurance policy can help cover these financial losses, giving you the breathing room needed to plan your next steps. However, it’s important to note that this coverage isn’t always automatically included. Be sure to check with your insurance agent to confirm if it’s part of your policy or if it needs to be added as an optional feature.
Non-occupied rental
The last thing you want to do is dig into your own bank account to pay for costly damages and losses. Situations where your rental property must sit vacant for extended periods of time can put a strain on your pocket. Let’s say that a thunderstorm rips through the area and severely damages your property. Or maybe your home is the victim of crippling vandalism.
Without anyone there to put in an immediate report, emergency response times may be delayed. This means that your home is at greater risk of severe damage. If the property has been unoccupied for more than 30 days, a non-occupied rental policy can cover those costs. This helps you make critical repairs without breaking the bank.
What Does Landlord Insurance NOT Cover?
While landlord insurance is great, it’s far from being foolproof. Realistically, there are some situations that insurance companies just won’t cover (no matter how much you plead with them). Familiarize yourself with these exceptions so you can plan around them appropriately, just in case.
Tenant belongings
Most landlord insurance policies do not cover tenants’ personal possessions, which could include their car, clothing, electronic devices, and anything else they brought with them to the rental property. Instead, landlords should encourage tenants to purchase renter’s insurance. Renters insurance helps tenants replace or repair their personal items in case they’re damaged or stolen.
Landlords insurance vs. renters insurance
While landlord insurance and renters insurance serve different purposes, they are complementary and essential to a well-protected rental arrangement. Landlord insurance is designed to protect the property owner—it covers the physical structure, liability if someone is injured on-site, and loss of rental income if the property becomes uninhabitable. It does not, however, extend to any personal belongings the tenant brings into the home.
Renters insurance, on the other hand, is intended for the tenant. It provides coverage for personal belongings, liability for injuries the tenant may cause to others, and even temporary housing expenses if the rental becomes unlivable due to a covered event. While landlords are not legally required to carry landlord insurance, nor can they force renters to purchase renters insurance by law in most states, it's highly advisable for both parties to have their respective policies in place. Together, these two types of insurance create a robust safety net that protects everyone involved in the rental arrangement.
Rental property maintenance
Landlord insurance typically does not cover normal wear and tear to the property. Any items that fall under the definition of property maintenance—like routine HVAC servicing, carpet replacement, or repainting—are not covered and are the landlord's responsibility.
To keep your renters happy and receive good reviews, make sure you conduct regular maintenance on your property. As with all insurance policies, be sure to review what items are considered regular maintenance.
Other common exclusions
Additional scenarios often excluded from standard landlord policies include:
- Flood damage (typically requires separate flood insurance)
- Earthquake damage (usually needs a separate endorsement)
- Damage caused by pests, such as termites or rodents
- Intentional acts or neglect by the landlord
- Loss or damage to a roommate’s or guest’s personal property
Always read your policy carefully and ask your agent for clarification on exclusions to avoid costly surprises.
What Factors into Landlord Insurance Costs?
You might be wondering, “how much does landlord insurance cost?” While there is no exact estimate, the Insurance Information Institute states that landlord insurance usually costs 25 percent more than homeowners insurance. However, the actual cost can vary widely.
Insurance premiums for landlords exist on a spectrum, with no two policies costing exactly the same. The amount you’ll pay depends on a variety of factors, including:
- Whether your property is a short term or long-term rental
- Safety features, such as the security system and smoke detectors
- Age and condition of your property
- Number of rental units you own
- Location of your property (i.e., city and state)
- High risk features, such as pools, fireplaces, etc.
Additional Insurance Landlords May Want to Consider
Specific circumstances can warrant additional insurance coverage for landlords. For example, properties in high-crime areas might need vandalism insurance. Properties located in areas prone to natural disasters, like hurricanes or earthquakes, might require coverage for those specific risks. If any of these situations pertain to you, consider some of these extra coverages:
- Flood insurance
- Earthquake insurance
- Personal umbrella insurance
- Wildfire insurance
- Vandalism insurance
Learn More About Landlord Insurance on Apartments.com
Whether you're a seasoned property owner or just starting your rental journey, understanding your insurance needs is essential to protecting your investment. Landlord insurance provides critical coverage, but knowing where it stops—and where a renter’s responsibility begins—is just as important.
Need help navigating your options or managing your rental property more effectively? Apartments.com is here to support you every step of the way. From tenant screening and lease tools to insurance education and property marketing, we’re your one-stop shop for property management resources.
This article was originally published on March 28, 2022.
FAQs
What’s the difference between landlord insurance and homeowner insurance?
If you want to convert your home into a full-time rental property, then you will need to purchase a comprehensive landlord policy. Comparatively, homeowner’s insurance is necessary if you are living in the home. Also, consider all the items that you possess. Homeowner’s insurance can usually take care of your personal belongings, but landlord insurance may only cover items that service the renters.
And most importantly, you can’t forget about liability protection. Landlord insurance is your best defense if you are found liable for a tenant’s injury. Meanwhile, a homeowners insurance policy can protect you and your family when an accident happens, regardless of whether you are at home or not.
Are landlords legally required to have landlord insurance?
There is no federal law that requires landlords to carry landlord insurance. But do not let that deter you from purchasing a policy. Protect yourself against all the unpredictable events that can happen at your property. From renter injuries to storm damage to burglary, the coverage you receive from a landlord policy is invaluable. Not having to pay the cost of an insurance policy is tempting, but anything can happen. In the long run, you will be glad you opted in.
Does landlord insurance replace a tenant’s rental insurance?
The short answer: no. Why? Landlord insurance policies do not typically cover a tenant’s personal belongings. If a tenant wants to protect their own items (clothes, car, electronics, etc.), then they will need to purchase separate rental insurance.
