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People who have property that they rent out on a long-term lease, such as a second home or guest house, may need landlord insurance.
This type of insurance goes beyond the best homeowners insurance. Property owners can make claims for problems such as loss of rental income if the house is damaged and you can’t rent it out.
What Is Landlord Insurance?
Landlord insurance covers the dwelling, other structures (such as a fence), your personal property and liability. It also covers loss of rental income.
You’ll find similarities when comparing landlord insurance and homeowners insurance. Still, a standard home insurance policy likely won’t cover damage to a rental property and won’t help pay for lawsuits against you involving the unit.
Expanded landlord insurance can include coverage for stolen property, vandalism, additional construction expenses to bring the building up to code, inflation adjustments to coverage, builder’s risk insurance and workers compensation if you have employees who help rent out or maintain properties.
Is Landlord Insurance Required?
States don’t require landlord insurance, but it’s still a good idea to make sure your investment is adequately covered.
Most lenders require landlord insurance if you have a mortgage or you’re financing the property.
Most lenders require landlord insurance if you have a mortgage or you’re financing the property. That’s because lenders have a financial stake in your property, so they want to make sure it’s covered.
Even if a lender doesn’t require landlord insurance, it can be a wise financial decision to buy coverage.
What Does Landlord Insurance Cover?
Landlord insurance covers the dwelling, unattached structures on the property and your own personal property. It also includes liability coverage and loss of rental income if your property is damaged by a problem covered by the policy, such as a fire, and you can’t rent it out.
Here are common coverage types you’ll likely see in landlord insurance policies.
- Dwelling coverage: Landlord insurance generally covers any physical damage or loss to the property caused by problems such as wind, hail and fire.
- Other structures coverage: Structures not connected to the property, such as a fence, can be covered under the policy.
- Personal property: This covers damage to your own possessions that you use to maintain the rental property, such as a lawnmower or snowblower.
What Landlord Insurance Doesn’t Cover
Landlord insurance generally doesn’t cover damage to the renter’s personal belongings. For example, if a tenant’s furniture is destroyed in a fire, your landlord insurance doesn’t cover their belongings. The tenant needs renters insurance for that.
Landlord policies exclude certain problems, much like homeowners insurance exclusions, such as:
- Earth movement such as earthquakes
- Volcanic activity
- Erosion
- Mudslides
- Water damage due to a sewer or drain backup
- Neglect
- Acts of war
- Asbestos removal
Additional Landlord Coverage to Consider
Landlord insurance may offer other coverage in a policy, too. Here are optional coverages you can often add to a policy.
Burglary
Optional burglary coverage can pay you if your property gets stolen, such as a stolen lawnmower. A standard landlord insurance policy generally covers damage to your belongings stored or used on the property, but not theft.
Vandalism
The additional coverage reimburses you if a vandal damages the property. A standard landlord policy doesn’t typically cover vandalism.
Building Codes
If you’re repairing damage and now need to meet higher building codes, optional insurance coverage can bridge the costs for the better repairs.
Floods
Like a standard homeowners insurance policy, landlord insurance doesn’t cover flood damage. Instead, you’ll need separate flood insurance. You can buy a policy through the National Flood Insurance Program or a private flood insurance company.
Other Coverage
Additional coverage offered in a landlord policy might include:
- Debris removal
- Fire department service change
- Trees, shrubs and plants
- Collapse of property
What Does Landlord Insurance Cost?
A landlord insurance policy can cost about 25% more than a comparable homeowners policy, according to the Insurance Information Institute.
The national average cost for $350,000 worth of homeowners insurance coverage is $1,582 annually, according to a Forbes Advisor analysis of home insurance costs. Using the 25% estimate provided by Insurance Information Institute would put the average landlord insurance for the same coverage at nearly $2,000 per year.
Landlord Insurance Vs. Renters Insurance
Landlord insurance and renters insurance cover different things and people. Landlord insurance covers the property owner and handles the structure and physical apartment units. Renters insurance is for the tenant and covers the renters’ belongings.
Landlord insurance does not cover the renters’ personal property.
Another difference involves liability insurance. Landlord insurance covers the property owner for liability claims involving common areas and the building. Renters insurance covers the renter for liability claims that take place within the unit or involving the individual.
A common misconception is that landlord insurance covers the renters’ property, but that’s not the case. Landlord insurance covers the physical structure, but not personal items like clothing, furniture, appliances and electronics.
Landlord Insurance Vs. Homeowners Insurance
Landlord insurance and homeowners insurance are similar in multiple ways. They both offer dwelling and other structures coverage, and liability coverage. But landlord insurance provides additional coverage a landlord may need.
Landlord insurance policies have loss of rent coverage and can provide add-on coverage for the landlord’s property, while homeowners insurance doesn’t offer loss of rent coverage or other landlord-specific add-ons.
Another difference between landlord insurance and homeowners insurance is cost. Landlord insurance typically costs more than homeowners insurance.
What Type of Insurance Do You Need as a Landlord?
The type of insurance you need as a landlord depends on the rental. Here are the differences.
| Type of rental | Coverage you likely need | What to know about coverage |
|---|---|---|
Long-term rental | Landlord insurance | Landlord insurance is for long-term rentals over six months. |
Occasional short-term rental | Homeowners insurance | A standard homeowners insurance policy typically covers you if you occasionally rent out your primary residence for brief periods. Notify your insurance company if you’re renting out. It may require a rider to the policy to cover the rental. |
Frequent short-term rental | Short-term rental insurance | Short-term rentals through programs like Airbnb aren’t typically covered by a standard homeowners insurance program. If you frequently rent out your home, check with your insurance company about buying short-term rental insurance. |
What Factors Influence the Cost of Landlord Insurance?
Like homeowners insurance, a landlord insurance quote depends on the amount it would take to rebuild the property if it’s damaged or destroyed. The cost to rebuild is impacted by the size, age and type of construction of the property.
Other factors that influence the cost of landlord insurance include:
- Your insurance company. Rates can vary significantly among companies. That’s why it’s wise to compare landlord insurance quotes from multiple insurers.
- Location. Areas with high vandalism, thefts or natural disasters typically pay higher insurance rates.
- Discounts. You can trim your landlord insurance costs by qualifying for discounts. For example, security systems can lead to an insurance discount.
- Deductible. A deductible is the amount subtracted from an insurance claim check. The higher your deductible, the lower your landlord insurance cost.
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Landlord Insurance FAQ
Does landlord insurance cover loss of rental income?
Yes, landlord insurance can reimburse you for lost rental income if you cannot rent the unit because of damage caused by a problem covered by the policy.
Does landlord insurance cover tenant damage?
Landlord insurance can help you if a tenant accidentally damages the rental unit. For instance, your policy could reimburse you if a kitchen fire damages the apartment.
How do I file a landlord insurance claim?
The process of filing a landlord insurance claim is similar to filing a homeowners insurance claim. Contact your insurance company, which will want information about what happened. For instance, what was the cause of the loss and what’s been damaged?
A theft claim will require a police report.
The insurer will ask you to fill out claim forms describing the situation, and it may send a claims adjuster to investigate the claim. The insurance company will then decide on a claim payout.
Before filing a claim, try to estimate the repair cost of the damage. You don’t want to file a claim if the damage barely exceeds your deductible since it won’t save you much money and may lead to higher insurance rates.
For instance, if an attempted break-in results in a broken door jamb, you might decide to pay for the repairs yourself rather than face a deductible and insurance rate hike.
Is landlord insurance tax deductible?
Yes, you can deduct landlord insurance costs from your taxes. You would include that information on Row 9 of the Schedule E (Form 1040) Supplemental Income and Loss form while filing your taxes.
