Home Insurance Tips for Landlords
Thinking about securing your home through home insurance is an essential consideration for most homeowners. According to statistics, one in twenty insured homes file a claim annually. The most expensive claims come from damages from fire and lightning.
When you transition into a landlord or landlady, it’s intuitive to think that your homeowner insurance will cover your rental home or space. But that is far from reality.
The pro home insurance tip for landlords is getting landlord insurance. If you’re renting out your home or space, landlord insurance offers the most comprehensive coverage for your property against damages and tenant liability.
Here’s all you need to know about landlord’s insurance and why you should get one for your property investments.
What is Landlord Insurance?
Renting your property exposes you to unique risks that a homeowner typically doesn’t have to worry about. A standard homeowner’s insurance policy doesn’t cover additional risks such as damages caused by the tenant or tenant liability.
If you don’t cover these, you can incur high out-of-pocket costs in case of damages to your property or tenant.
Landlord insurance policies offer additional cover against these risks. These policies are custom-tailored and may include cover for:
Personal or commercial property damages
Medical liability claims for commercial properties and tenants
Various companies offer additional unique covers for their landlord insurance policies.
Landlord insurance should be a core concern for all landlords and landladies. While renters benefit from having renters insurance, only 37% have obtained it. Moreover, landlord insurance protects you, your property, and your tenant from significant financial costs arising from various risks and damages.
When is it Necessary to Have Landlord Insurance?
Having landlord insurance is not a legal mandate. However, getting one on top of your homeowners' insurance is smart. Typically, the necessity of getting landlord insurance will depend on whether you rent your property on a short-term or long-term basis.
Your homeowners' insurance may cover you if you rent out your space or home infrequently, say once every six months, over a weekend. However, confirm with your insurance company if your cover has this provision.
In most cases, if you have a short-term rental Airbnb, you may require additional short-term rental coverage from your insurer.
The best way to determine the necessity of landlord insurance for your short-term rentals is by discussing with your insurer how often you rent out your space. Then, they will help you choose the best cover.
It is essential that you get landlord insurance if you rent out your property on a long-term or full-time basis, typically for months or years.
Most insurers categorize a rental property as a business property since you generate income from it. However, your homeowners' insurance doesn’t offer coverage for business property, leaving you vulnerable to high-cost damages and risks.
What Landlord Insurance Covers
Good, comprehensive landlord insurance offers three core protections. They include:
This covers the event that your real estate or furnishings suffer from a fire, natural disaster, gas or electric malfunction, vandalism, earthquake, or irresponsible tenants. The best policy will offer a replacement cost instead of the actual cash value for the damaged property.
This covers medical or legal costs following a tenant or visitor to your property getting injured due to maintenance issues such as an architectural collapse, icy walkways, or an out-of-control bee hive.
Rental Income or Rental Default Insurance
This provides temporary rental reimbursement cover if your property unexpectedly becomes inhabitable due to problems such as termites, severe mold, a sinkhole, or rat infestation. Most policies pay the amount you would have received if tenants had occupied the property.
Most underwriters use the DP notation to refer to the different landlord insurance packages, with DP meaning “dwelling property.” Therefore, you get DP-1 to DP-3 cover, with DP-1 being the most basic and DP-3 the most comprehensive.
Additional Landlord Insurance Covers
You’ll often get landlord insurance policies with several additional coverage options. Despite not being as vital as the key provisions in the three main covers, they come in handy and save you money in the long term.
Some of the additional coverage options you can get include:
Guaranteed income insurance – This covers the landlord if the tenant fails to pay rent in part or wholly for one month
Emergency coverage – This helps cover the cost of emergency service requests by the tenant, such as fixing a leaking dishwasher or lock picking if they got accidentally locked out of the house.
Flood insurance – Most landlord insurance policies don’t include flood damage as part of the coverage for natural disasters or municipal plumbing. If you live in a flood-prone zone, this is an essential addition.
Additional construction expenses – This covers expenses incurred bringing a building back up to code after damages.
Other additional coverages your insurer may provide include burglary and vandalism.
What Isn’t Covered by Landlord Insurance?
Despite covering so many things, landlord insurance doesn’t offer cover for the following:
Shared property – You may not qualify for a landlord insurance policy if you live upstairs and rent your basement to your tenant. Most providers require that your unit be non-owner occupied to be eligible for the policy.
Tenant’s personal property – Landlord insurance policy doesn’t cover personal property. Your tenant will need to purchase renters insurance to protect their personal items, such as clothing and furniture.
Maintenance – Property maintenance remains the sole responsibility of the property owner. For instance, if the property’s washing machine breaks down because of normal wear and tear, you’ll pay for its maintenance out of pocket.
The Cost of Landlord Insurance
The national average cost for homeowners insurance is $1,288. Landlord insurance typically costs 15% to 25% more, placing its average at about $1,481 annually. However, these prices will vary based on where you live, the age of your home, and other factors.
The premium added to landlord insurance results from the higher risk of damage and incidents associated with commercial property.
The price of your premium and the period your property is in service have an inverse relationship. For instance, if you rent your home for 12 weeks instead of all year round, you can pay nearly double the typical annual premiums.
The rationale for this pricing difference is that short-term tenants may be more careless and thus pose a higher risk of damage or incidents.
When shopping for your policy, ask your insurer about their bundle options. Signing up for homeowners and landlord insurance from the same company may win you a discount.
Talk to a Trusted Insurance Company for the Best Plan
Landlord insurance is necessary to protect your rental property against damages, incidents, and tenant liability. There are steep variations in costs and additional beneficial coverages that you can get. Therefore, ensure you talk to a trusted insurance provider for the best plan.