Contents

In the world of property management, there are a handful of things that are considered essential.

These can include an office, employees, tenants, and most importantly, a rental property.

However, the most essential element would be something that can protect all of these other assets.

If you haven't guessed it, we're talking about insurance.

One of the most important forms of insurance is landlord insurance. Landlord insurance has countless benefits and can save landlords thousands of dollars.

In this guide, we will be describing everything about landlord insurance and why it is so essential.

To begin, let's go over what landlord insurance is.

What Is Landlord Insurance?

Landlord insurance is a form of insurance coverage that protects the home or property that someone rents and provides extensive liability coverage.

If a landlord is responsible for an entire property, they should consider getting landlord insurance. That is because, for rental properties, homeowners insurance only provides limited coverage.

On the other hand, a landlord insurance policy is much more extensive and can cover much more. This means that the property owners and landlords are more protected and do not have as many risks.

Why Is Landlord Insurance Important?

You may be thinking now that a homeowners insurance policy is enough coverage for their rental properties. That is correct... but only to a certain extent.

While homeowners insurance covers a lot of things in many cases, it only applies to owner-occupied homes. This becomes a problem when you are managing properties that are occupied by other people.

And, since renters are not typically held liable for things like large malfunctions and personal injuries, the property owners may be the ones that are responsible for paying for all of the damages and costs.

But, with landlord insurance, all of these costs could be covered by the insurance company.

Now, to get a better idea of how useful landlord insurance can be, let's go over some of the different things that it can cover.

What Does Landlord Insurance Cover?

A good landlord policy can cover a huge multitude of different things. But, since all landlord insurance policies cover different things, it's important to have a good idea of what you need covered.

Below, we have provided an outline of some of the things that most landlord insurance policies will cover.

Property damage

The main thing that landlord insurance covers is property damage.

The property damage can stem from a number of different things, including:

  • Natural disaster
  • Fire
  • Gas malfunction
  • Vandalism damage
  • Irresponsible tenant damage

...and potentially more.

These damages could cost the landlord thousands of dollars. But, with landlord insurance, the landlord will not have to pay for any of them.

Lost Income

Another thing that landlord insurance covers is loss of rent.

In the case that the rental property becomes uninhabitable, the property owner will lose some money in rent. Luckily, if they have a landlord insurance policy, this counts as a covered loss.

Some things that may hinder a rental property uninhabitable for some time include:

  • Severe mold
  • Termites
  • Rat infestation
  • Sinkhole

...and any other major event.

Liability Protection

Lastly, and potentially most important, is the liability coverage. This protection covers any medical payments or legal costs that might ensue if any tenants suffer an injury due to a malfunction in the property.

These malfunctions can include:

  • Structural collapse
  • Pest infestation
  • Ice in common area

...and anything else that can cause harm to a tenant.

Although some policies may offer additional coverage, these are the essential protections that every policy should offer.

So, at this point, you should be clear on the various benefits that landlord insurance can grant landlords.

However, one of the most important aspects is still unclear - the price.

In the next section, we will be going over what landlord insurance typically costs.

How Much Does Landlord Insurance Cost?

When considering landlord insurance, one of the most important things to consider is the price.

The national average sets landlord insurance at around 20 percent more than the price of a homeowners policy. This is because the typical landlord policy covers more than the typical homeowner's policy and therefore costs more.

So, the national average price for a landlord insurance policy comes out to around $1,900 a year, or $158 per month.

However, there are many characteristics of a property that can impact the price of the policy, explained below.

Size of Property

Since larger homes have more volume and space for repairing, the landlord policy will be more expensive.

This is because the base portion of a landlord policy is typically determined by the size of the home and additional structures.

As a result, larger homes have higher premiums and smaller homes have lower premiums.

Value of the Property

Similar to the size of the property, the cost of a landlord insurance policy increases as the value of the property increases.

This is because more expensive homes typically cost more to do repairs on and replace things inside. Thus, insurance companies typically use the property value or fair rental value to help calculate their prices.

Age of the Property

Another thing that can affect the price of a landlord insurance policy is the age of the property.

This is because repairs for older homes can be more complicated when compared to newer homes. For example, an older home may not be in compliance with some local code or ordinance so it has to be brought into compliance.

Tenancy

The consistency of tenants can also be a factor that is considered when setting the price of landlord insurance policies.

This is because, if a property has a history of short, monthly leases, it may show that tenants are not really invested in the property and more likely to lower its value.

All of these characteristics play their own part in determining the price of a landlord insurance policy. But, there are ways to get "landlord insurance discounts" by just changing things on the property.

Some of the best ways to lower the price of landlord insurance include:

  • Installing Security Features like security cameras, smoke alarms, sprinklers, and locks.
  • Eliminating High-Risk Features like pools or hot tubs.
  • Consult A Professional in order to ensure that you get the best price possible.
  • Bundle Your Policies if you are getting other insurance policies from the same insurance company.

Although these practices are not guaranteed to lower the price of your insurance policy, it can really help.

Landlord Insurance FAQs

In this section, we have provided answers to some common questions regarding landlord insurance.

What is the difference between landlord insurance and renters insurance?

Renters insurance covers the contents, or personal property, inside the dwelling that you rent, but not the building. Landlord insurance, on the other hand, covers the building and generally not the contents.

This is because each party to that lease has specific things that they own which would cause them a loss if they were destroyed, but neither has an interest in the others’ property.

Is landlord's insurance required?

No. Property owners are not required to have a landlord insurance policy to rent out their property.

Though landlord insurance is not mandatory, we recommend that property owners seriously consider purchasing a policy in order to cover damages that come up from being a rental property owner.

What is the difference between landlord insurance and homeowner's insurance?

The main difference between landlord insurance and homeowner's insurance is that homeowners insurance covers owner-occupied homes while landlord insurance covers liability and damages connected to tenant-occupied homes.

Santiago Aday

As a summa cum laude graduate and a background in software development, Santi loves simplifying the complicated aspects of property management.