The Ultimate Landlord Insurance Guide

Investing in real estate and rental properties is a great way to generate passive income. Just like your primary residence, all property you own should be insured, especially if you are renting to tenants. It is important to understand what insurance is necessary to protect yourself, your property and your renters if damage occurs.

Landlord Insurance Guide – The Basics

While landlord insurance is not always required by law, lenders will not finance a rental property without it. Even if you have not financed a property, you need insurance to protect your investment should anything happen to your non-owner-occupied home.

What is landlord insurance?

Landlord insurance provides property and personal liability coverage for investment property. Like homeowners insurance, if a covered event occurs causing injury or damage, your insurance will protect you from financial loss.

Why do you need landlord insurance?

If the property you are renting out is not your primary residence, homeowners insurance is not enough to cover you for personal liability claims like at-fault injuries, loss of rent and damage to the property caused by tenants.

Landlord Insurance vs Homeowners Insurance – Key Differences

Homeowners insurance is intended for primary residence. Landlord insurance is around 25% more than regular homeowners insurance because of the additional coverages for loss of income if rent cannot be paid or if a tenant is injured. Traditional homeowners insurance often only covers guests in the case of injury.

Other risks arising from the unique circumstance of investment property lack adequate coverage under general homeowners insurance.

What Does Landlord Insurance Cover?

  1. Property Damage.

Just like homeowners insurance, landlord insurance covers your property in case of damages caused by severe weather and natural disasters. Fires, hurricanes, tornados, hail damage and snowstorms are among the most common covered events. Landlord insurance will also protect your personal property provided to tenants like lawn mowers, tools and appliances. It further protects you from financial loss due to damage caused by tenants.

  1. Lost Rental Income and Guaranteed Income Insurance.

If covered damage occurs to your rental property resulting in tenants unable to stay, landlord insurance can cover the lost revenue of having the home vacant. This does not include circumstances where tenants are unable to pay rent due to financial hardship or if you are unable to find new tenants.

  1. Liability Protection.

If an injury occurs on your property due to the condition of the home and you are found at fault, landlord insurance will cover legal costs associated with settling the claim.

  1. Emergencies

Landlord emergency cover is an additional add-on coverage that will help where rush services are needed costing more than regular maintenance calls. Most insurance providers offer comparable policies, but check with a trusted provider for their specific offerings. These most often include:

  • Burst pipes, including a boiler
  • Water or electrical failures
  • Acute or sudden roof damage which causes a leak
  • Blocked sewer and drains
  • Broken doors and windows resulting in a security failure
  • Sudden rodent or pest infestation
  • Tenant loses keys and needs assistance gaining access to the property

Often, this emergency coverage can assist with additional accommodation for renters if the emergency makes the residence unlivable.

Rental Property Coverage Options for Landlords

There are a few things to consider before deciding which type of insurance coverage you need if you are renting out part of your home, an entire home or other buildings to tenants. The following information will help guide you through initial decision making, but it is always best to consult with your local independent insurance agent to ensure that you are adequately covered. Your independent agent will review your unique situation and provide insurance options tailored just for you.

Homeowners Insurance

In some instances, your homeowners policy may cover the building and your personal items while all or part of your house is rented to tenants. Coverage issues can arise if you rent the building consistently for months or years on end without living there yourself. However, as long as you reside in the building and rent a portion of it to tenants, your homeowners policy might be adequate. This situation requires a consultation with your independent agent to assess coverage.

Dwelling Fire Insurance
A Dwelling Fire policy is likely needed if you will not be residing in the building while it is being rented to tenants. The five coverages provided in this type of policy include two required coverages and three optional coverages.

Coverage A Dwelling covers materials or supplies needed to construct, alter or repair the dwelling if loss occurs due to a covered peril. This is a required coverage.

Coverage B Other Structures covers structures on the premises that are not attached to the primary house, such as a detached garage or shed. This is also a required coverage.

Coverage C Personal Property covers your personal property on the premises like appliances, lawn mowers or power tools used for the building maintenance. This does not provide coverage for tenant’s personal property.

Coverage D Fair Rental Value is coverage for lost rent if tenants are not able to live in the apartment due to a covered peril.

Coverage E Additional Living Expense is coverage for additional expenses incurred from a covered peril.


Business Owners Insurance or Business Owners Package (BOP)

When your rented or leased building is larger than a family home, you need businessowners coverage to protect your assets. For landlords of apartment buildings, complexes or office spaces, adequate protection can be obtained economically by combining several business owners’ coverages into a Businessowners Package (BOP) policy.

Typical coverage needs include:

  • Business Property covers the building, equipment and income in the event of a covered loss.
  • Business Liability covers your buildings in case an accident occurs, including slip and fall mishaps.
  • Business Crime is coverage for theft, forgery, robbery, vandalism and employee dishonesty.
  • Building Ordinance covers the increased cost to comply with ordinance laws if you need to repair or remodel your building after a covered loss.

There are additional businessowners coverages you can add to your package to ensure that you are protected. Your independent agent will review your needs and provide options to protect your assets now and in the future.

How Much Does Landlord Insurance Cost?

Many factors go into deciding landlord insurance premiums.

  • Older homes cost more to repair due to their building complexity, and the materials used when the home was built. For example, cedar shakes found on the exterior of older homes are costly in today’s market and can contribute to an elevated fire risk. The overall value of the home also contributes to the premium calculation. Higher home value costs more to insure. The average cost of landlord insurance is about $2,100.
  • Property location, size and type also contribute to insurance costs. A single-family home costs less to insure than a duplex or apartment building. Regarding location and size, the selling market of the area is a good indication of insurance requirements. Insurance must be enough to rebuild the home if it is destroyed.
  • Additional factors influencing insurance costs include crime rates concerning vandalization, how steady the overall market is in the neighborhood and how well the schools in the area perform. Weather patterns can add to costs if the home is at a higher risk of damage from forest fires, tornadoes, hurricanes and other natural covered disasters.
  • Your individual history of claims can influence what you pay in premiums. If you have a history of making many insurance claims on properties you own, this can indicate to your insurer that you are at a high risk of making more claims (and costing them more money) in the future.

Wrapping Up Our Landlord Insurance Guide

Recap of Key Points

  • Landlord insurance provides property and personal liability coverage for investment property
  • Costs about 25% more than homeowners insurance
  • Covers damage to the property, your personal property and medical/legal claims from tenants due to injury
  • Many levels of coverage available to meet complex rental situations

Whether you are renting a small apartment attached to your home or an entire apartment building, having the right coverage can protect you and your investment from financial loss and costly legal trouble.

Receive a free consultation with an expert agent at Mutual Benefit Group. Your local independent insurance agent can provide the best advice regarding the coverage you need to protect your assets when you rent to others. Use the Find An Agent locator to find an independent agent near you today.

FAQs about Insurance for Landlords

Does Landlord Insurance Cover Tenant Damage?

Yes, but you must choose a Dwelling Coverage that lists tenant damage as a covered peril.

How Much Renters Insurance Should a Landlord Require?

A landlord should require a renter to have a minimum coverage of $100,000. This protects the renter’s personal property, liability for injuries or property damage of a renter’s guest where the tenant is at fault and could cover alternate living expenses if the dwelling is temporarily uninhabitable.

Is landlord insurance required by law?

No, but it is difficult to receive financing without being insured. If you do not insure your rental property, you pay for all damages, medical claims and services out of pocket at the full amount.

Can I add additional coverage to my landlord insurance policy?

Yes. There are several additional coverages you can add to your landlord policy to ensure you, your investment and your tenants are ready for everything.

How can I lower the cost of landlord insurance?

  • Add security features like an alarm system, outdoor security cameras, fire and carbon monoxide detectors and a sprinkler system.
  • Do not include high-risk features in rental properties like pools and hot tubs.
  • Bundle insurance policies for a discount
  • Ask about and use all applicable discounts your company offers
  • Consider raising your deductible