As a landlord, you’re both a property owner and a business owner – a dynamic that creates unique risks and liabilities. Whether you own one small rental home or have a large portfolio of investment properties, landlord insurance offers coverage tailored to your needs, providing a safety net for your business and your finances.
Understanding what rental property insurance covers can help you determine the level of coverage you need. Before meeting with an independent insurance agent to find a landlord policy that’s best for you, learn the basics about what your policy should cover and how much landlord insurance may cost.
What Is Landlord Insurance?
Landlord insurance is a robust policy that can help protect you from financial loss and liability related to your rental property. To meet landlords’ unique needs, rental property insurance policies combine aspects of business and homeowners insurance and may include the following coverage types:
- Commercial property insurance: This part of the policy helps cover the cost of damage to your rental properties caused by fire, natural disaster, theft, vandalism, and similar causes.
- Liability insurance: This coverage can help pay for legal costs and damages if you’re sued for damage or injuries that happen on your rental property.
- Loss of income: Loss of income coverage can help cover some or all of your lost income if your rental property becomes uninhabitable, such as during restorations after a covered event.
- Workers' compensation: If you have employees, like maintenance workers and property managers, workers' compensation insurance can help reduce your liability and cover their medical costs and lost income if they become sick or injured on the job. This coverage may not be included in all landlord policies.
Landlords that only own one or two small properties may start with a basic policy. Later, they can expand upon that policy as they acquire more properties, such as by increasing their coverage limits or adding new types of coverage. Working with an independent insurance agent can help ensure you have the coverage you need as your rental property business grows.
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What Does Landlord Insurance Cover?
Because landlord policies are designed to meet each landlords' unique needs, not all policies are the same. However, most landlord insurance policies should cover the following:
Imagine that you rent a small house to two young college students and one of their friends trips over a large stump in the yard. They end up with a broken arm and take up a liability case against you, the landlord. Liability coverage would help cover the costs of your legal fees and damages, such as lawyer fees and your tenants’ friend’s medical bills, if you’re found liable.
But that’s just an example of what you need to be prepared for with only one property! If you own numerous rental properties around the city, you may realize you’re taking on increased liability risk. To help protect you, you decide to get an umbrella liability policy. These policies expand the liability coverage in the original policy, kicking in to cover excess costs once the original policy’s liability limits have been reached.
In another scenario, say an electrical short causes a fire in one of your rental properties. The damage is contained to one room, but the home must be vacated for six weeks to allow restoration professionals to repair it. Loss of income coverage may cover part or all of the income you lose during the renovation period, helping you to make ends meet.
Similarly, when weather disasters strike, your rental property could be damaged. Getting that damage repaired is top priority. Your landlord policy’s property coverage will help cover the repair costs.
As the owner of several rental properties, you probably employ staff like maintenance workers, security, or office support personnel. If one of them gets hurt on the job, workers’ comp insurance can help cover the cost of their doctor visits, medications, and time off work.
The most common landlord insurance coverage
- Property damage: This protection covers losses due to most natural and human causes (except flood protection, which is insured separately).
- Liability: This protection helps cover legal representation and damages if you're sued.
- Loss of use/income: This policy helps support your business financially if your rental property becomes uninhabitable, resulting in loss of rental income.
If you continue to grow your rental property business, you should consider additional landlord coverage options, such as the following:
- Umbrella liability: Also known as excess liability coverage, this policy provides extended liability coverage that takes effect once your standard landlord insurance policy’s liability limits are reached.
- Workers' compensation: This coverage protects both your staff and your business if an employee experiences a job-related injury or illness.
- Appliance coverage: This supplemental policy helps protect boilers and other expensive equipment in your rental property.
- Inland marine coverage: This supplemental protection covers equipment that is being transported over land, like lawnmowers or snow plows.
- Vandalism protection: Some landlord policies may cover vandalism damage, but purchasing supplemental coverage can help cover high-dollar losses due to vandalism.
- Burglary insurance: Landlord policies may not cover possessions you keep on properties you rent out, like lawn care equipment or personal items stored in a garage, if they’re lost during a burglary. This coverage can help reduce your financial losses.
- Rental property under construction coverage: This policy can cover rental properties that are being developed or heavily renovated until they’re inhabitable.
- Building code coverage: If you have to make changes or updates to a rental property to maintain compliance with building codes, this policy can help cover those expenses.
What Isn't Covered by Landlord Insurance?
Landlord insurance policies are designed to be comprehensive, but they don’t cover everything. Events and damage that are often excluded from rental property insurance include:
- Water backup, such as from a faulty sump pump
- Short-term or vacation rentals, including Airbnb properties
- Flood or earthquake damage, which are only available through separate or add-on policies
- Maintenance and equipment breakdowns
- Eviction costs
- Intentional damage done by tenants
- Property that you rent out while still living on the premises, which may require you to add supplemental coverage to your homeowners policy
- Tenants’ belongings, which can be covered by tenant-held renters insurance
Does Landlord Insurance Cover Floods?
Flood insurance isn’t included in standard landlord insurance policies. Most flood insurance is federally regulated through the National Flood Insurance Program (NFIP) and must be bought as a stand-alone or add-on policy. If your rental property is located in a FEMA-declared flood zone, flood insurance is especially recommended and may be required by lenders.
How Much Does Landlord Insurance Cost?
Landlord policy costs differ between policyholders. Factors like the property’s size, condition, value, special features, location, and unique risks can influence the cost of a rental property policy. Because of the increased liability and potential risks, landlord insurance typically costs between 15% to 20% more than comparable homeowners insurance.
The Best Ways To Save on Your Landlord Insurance Quote
Landlords may pay more for their insurance than regular homeowners, but they typically have access to better discounts. Landlord insurance discounts are often based on your rental property’s unique risks and safety features. Here are some of the most common types of landlord insurance discounts.
Discount Type
Description
Safety Discounts
Preventive measures that help lower the risk for the carrier, like installing security and smoke alarms, fire extinguishers, etc.
Bundling Discounts
Carriers love having more of your business, so when you insure multiple policies with the same insurer, they reward you.
Group Discounts
Certain unions and groups, like teachers and veterans, receive discounts with a number of different insurance carriers.
Loyalty Discounts
Insurers love customers who stick around, so they’ll often reward those who’ve remained loyal with a nice little discount.
Landlord Insurance FAQs Answered
Landlord insurance can provide landlords with financial and liability protection related to property damage, accidents, or injuries that occur on the rental property.
Landlord insurance isn't required by law, but nearly every lender who helps you finance the property will require coverage to help protect their investment in you.
It's also important to note that your homeowners insurance won't cover property or liability claims of rental units if you aren't living on the premises.
Beyond that, your property is your business and should be insured as such. Building fires, tropical storms, tornadoes, vandalism, and liability claims are all common and devastating events, the effects of which can be minimized with the right landlord coverage.
Yes. Landlord insurance and supplemental policy premiums can be deducted on your taxes as an essential business expense. Always check with your tax professional about tax deductions.
Landlord insurance provides coverage for most natural disasters, such as lightning, fires, and storms. For these covered events, a landlord policy can help cover the cost of repairs and lost income. However, landlord insurance does not cover earthquakes or floods.
Most landlord insurance policies come with liability coverage to help protect you if a tenant is injured on your property. This coverage can help you pay for medical bills and legal costs (up to your limit) for the tenant.
Without proper liability coverage, you could be responsible for paying the tenant’s medical and legal costs, plus your legal costs and damages for which you’re found liable.
No. Landlord insurance policies are designed to cover properties that the policyholder (you) does not live in. Plus, landlords are in the unique position of owning a property and a business. Landlord insurance is designed with this in mind, combining elements of business and homeowners insurance policies.
Landlord insurance does not cover tenants or their possessions. While it isn’t a law, it’s generally recommended to ask tenants to carry renters insurance. These policies provide personal property, liability, and additional living expenses coverage for tenants. Tenants with this protection are often less likely to pursue legal cases against their landlords.
Yes. Landlord insurance includes loss of income protection. If the rental unit becomes uninhabitable due to a covered event, such as during restoration after a fire, your landlord policy can help cover some or all of that lost income. It probably will not cover income lost if your tenants are just unable to pay rent due to job loss or financial hardship.
Yes. Because standard landlord insurance policies include property coverage, repair costs associated with accidental damage done by tenants can be covered by the policy. However, landlord insurance typically won’t cover intentional damage done by tenants or normal wear and tear.
No, eviction costs aren’t typically covered by standard landlord insurance.
Standard landlord insurance doesn’t protect a tenant or their belongings, even if they’re damaged in a covered event. Landlord insurance typically focuses solely on protecting the structure and the landlord. Tenants will need to have their own renters insurance policies for their possessions to be covered.
Your Independent Insurance Agent Has Your Answers to Landlord Insurance Questions
Whatever you need, your independent insurance agent has your back. With a brief intro to landlord insurance basics, you’re now ready to work with an agent who will ask the right questions about your rental property, its uses, and your goals to help find the perfect blend of coverage at the right cost for you.
