When renting out space within their home or business to others, landlord insurance is necessary. This type of homeowners coverage takes into account any risks that come with renting to others.
Landlord insurance policies typically consist of three coverage areas for landlords: property coverage, liability protection and rental income replacement. Selecting the ideal policy depends on a variety of factors related to its location as well as other considerations.
Property Coverage
Homeowners insurance may not adequately protect a rented out property, so landlords require specific coverage tailored for this type of investment. While coverage options for landlord properties can differ significantly depending on where it’s being rented out and the specifics of each rental contract may be different; most policies include protection of dwelling and structure protection as well as personal property and liability coverage in addition to potential loss-of-rents protection.
Liberty Mutual, Allstate and StateFarm all provide landlord policies, with Liberty Mutual being especially popular. Their vast experience with landlord property coverage allows them to understand the special risks posed by rental properties. Plus their customizable options and affordable rates help landlords find an appropriate policy.
Dwelling insurance protects the physical structure of your rental property against perils such as fire, windstorm and certain forms of water damage. It may also cover damage from burglary or vandalism. Landlord insurance policies usually also cover personal items owned by the landlord but used in their rental properties; such as dishes, washers and dryers used for maintenance as well as furniture.
Importantly, landlord property coverage will not protect tenant belongings; as a landlord or manager you should encourage (or require) them to purchase renter’s insurance for personal items such as electronics. Also note that wear and tear caused by daily usage won’t be covered either – major repairs like plumbing leaks that could cause flooding or gas explosions may need to be handled without recourse to an insurer.
Liability coverage, also referred to as general or rental property liability insurance, protects you against legal fees and expenses should anything happen on your property which puts you liable. Furthermore, it protects you if tenants file claims against you that do not originate in negligence (i.e. you failed to repair an unsafe condition which resulted in injury or damage).
Loss-of-rents coverage or fair value rental insurance can help fill any income gaps should your rental property become unusable as a result of an covered peril, by covering lost rental income while your property undergoes renovation or repair work. This coverage reimburses you for lost revenue while your home undergoes renovation or repair projects.
Liability Coverage
If you own a second home, vacation property, or investment home that you rent out to tenants for six months or more of the year, rental property insurance could be something worth looking into. This kind of policy covers specific gaps that a standard homeowners policy might leave open – providing additional peace of mind.
Most landlord insurance policies cover damages to both the structure of your property and any appliances or systems installed for tenant use. They also typically include liability coverage that protects you against lawsuits if someone is hurt on your premises; for greater peace of mind when considering personal injuries on your premises, policies with higher limits of liability coverage might be preferable.
However, your rental property insurance will not cover damage caused to a tenant’s personal belongings in their rental unit. Tenants should purchase renters insurance on their own in order to safeguard their possessions. If you’re concerned that they might fail to purchase such coverage on their own accord, include a hold-harmless or indemnity clause in their lease contract that requires them to purchase such coverage and list you as additional insured in their policy contract.
While you may purchase rental property insurance separately, oftentimes combining it with home and auto policies will save you money on premiums and provide peace of mind that your investments are protected should anything happen to them. Many insurance providers offer this option and many companies provide it so you can purchase what’s right for your situation at a good value.
Your rental property insurance needs will depend on several factors, including its importance as an income stream and tenant risks; for example, in areas with higher crime rates it may be wise to select a policy with higher coverage limits.
If you are uncertain of what coverage your rental property requires, consulting an insurance broker could be beneficial. Insurance brokers specialize in all forms of coverage and understand their specifics; one like Obie can assist in helping compare options in order to find one best-suited to your investment property investment portfolio.
Tenant Coverage
Regardless of whether or not you plan to live there yourself, landlord insurance provides invaluable protection for both the property and you as the landlord from potential liabilities associated with tenants’ damages to it. Your policy could even offer lost rental income protection as well as safeguarding other aspects of your investment portfolio.
Landlord insurance policies should not be seen as replacement policies for your homeowners policy, which covers only physical damages to your home. Because homeowners policies typically don’t cover losses caused by tenants, separate landlord policies should be purchased. Some landlord insurance providers provide bundle options which save on premium costs.
Standard renters insurance policies only cover the possessions of one individual; thus you will require additional rental coverage if there are multiple tenants living under one roof. To ascertain how much coverage is necessary, conduct an inventory of items in your space and note their values; either by hand or using an app available online. If any individual items exceed their coverage limit on your policy, talk with your agent about adding an endorsement to it.
Tenant coverage may not cover valuables that cannot be easily replaced, however these can usually be covered through additional rider policies. A typical renters insurance policy also doesn’t typically cover things such as stolen vehicle coverage which should fall under auto insurance and flood damage which requires separate flood policies.
Finding the appropriate rental property insurance coverages is vital to protecting your investment while you’re not there to supervise it. If you need help figuring out which policies suit your needs best, Muller Insurance is here to assist – from explaining landlord versus homeowner policies, to helping find something tailored specifically to you and even helping obtain adequate protections for vacation homes, condos or any other dwellings you plan on renting out.
Additional Coverage
Your rental property’s location will determine if you require special coverage for natural disasters such as earthquakes and floods. Furthermore, if it lies near an area susceptible to wildfires, additional fire insurance might also be needed. Standard property coverage won’t protect tenant belongings should they be lost or stolen; for this reason they need their own renters insurance policies as a form of renter’s protection. In case damage from wear-and-tear or negligence such as gas leakage occurs without landlord insurance insuring coverage so they need separate policies as a landlords policy won’t cover these damages – therefore additional policies would need be necessary as part of standard property coverage would cover them.
Personal property coverage provides additional insurance for items used for building maintenance that aren’t technically part of the structure, like a lawnmower or refrigerator – typically an add-on feature. Furthermore, certain landlord policies offer rental income protection that provides temporary rental reimbursement should your property become damaged and uninhabitable.
When renting as short-term vacation property, standard homeowner and landlord policies won’t suffice – instead you will require homeshare or vacation rental insurance from an independent insurer in order to be properly covered.
When searching for landlord insurance, always compare policies from various providers and shop around to find one with more comprehensive coverage at a lower cost by comparing quotes. You might just find an ideal policy!
If you need assistance finding the best landlord insurance policy, reach out to The Clausen Agency, Inc. Our expert staff are ready and willing to help find you an insurance plan that meets both your needs and budget. Let us show you how we can protect your investment; call today and start saving!
