Landlord insurance is a type of homeowners insurance for people who rent out their property to someone else. Because this type of insurance is unique to landlords, it has a different list of inclusions than traditional homeowners insurance policies do.
Generally speaking, landlord insurance provides two different tiers of coverage — property protection and liability protection. If you've been wondering what landlord insurance covers and the specific inclusions in these policies, read on to learn more.
Property Protection for Landlords
Like a traditional homeowners insurance policy, landlord insurance provides coverage for physical property you own and rent out. Property that may receive coverage within a landlord policy includes:
- Dwelling Coverage: Coverage for the building you rent out is one of the most important components of landlord insurance. Specific protection for dwellings can be used if your rental property burns to the ground, a tornado destroys the building or makes it uninhabitable or if your building or its components are damaged by hail.
- Coverage for Other Structures: Other structures on your property can qualify for property protection coverage, including detached garages, storage sheds and more.
- Select Personal Property: In some landlord insurance policies, select personal property may be covered as well. For example, equipment left on-site that is used to maintain the property may be covered under a landlord insurance policy.
Just like with a homeowners insurance policy, landlord property insurance comes with deductibles and limits. Your landlord policy deductible is the amount of money you have to pay before your policy kicks in to cover your losses. Meanwhile, policy limits set a cap on the amount your landlord insurance policy will pay out in claims.
You may be able to adjust your policy deductibles and limits to meet your unique coverage needs. For example, raising the deductible on your policy can help you secure lower monthly (or annual) insurance premiums. Meanwhile, raising your policy limits could lead to higher insurance costs, yet you'll have more coverage at your disposal if you need it.
Liability Protection for Landlords
In addition to coverage for your rental building and other property and structures, landlord insurance comes with a liability component. Landlord liability coverage can come into play if someone is injured on your property and decides you are responsible.
Liability protection is important to have at any time, but it will show its worth quickly if you ever have to use it. If one of your tenants is injured on the property after slipping on ice during winter weather and decides to sue you, for example, landlord liability coverage can provide you with much-needed financial protection. The same is true if anyone else is injured on your property and decides you're responsible, even if the person is just a passerby.
Landlords will also notice that individual landlord insurance policies come with limits on coverage. However, deductibles are rarely required for liability claims.
Additional Insurance Coverage Options for Landlords
We've already explained what landlord insurance covers in most cases, but it's important to note that you usually can tailor your policy to your needs. Typically, this means adding on additional coverage options that might be needed based on where your property is located or any specific concerns you have.
Additional landlord insurance coverage options can include:
- Building Code Coverage: This add-on coverage can kick in to cover the costs of adjustments if eligible repairs to your rental property require you to meet current building codes.
- Coverage for Burglary: While landlord insurance may provide coverage for damage that occurs to your building during a burglary, items stolen during the crime are not covered.
- Coverage for Vandalism: Vandalism may not be automatically covered in your landlord insurance policy. If you don't have this protection, you may be able to add it for an additional cost.
- Earthquake Insurance: Coverage for earthquakes is typically excluded from homeowners and landlord insurance policies, but you may decide to purchase this additional insurance if you believe you need it.
- Heating or Air Conditioning Loss Reimbursement: This coverage can reimburse you for losses if you're required to make payments to your tenants as a result of loss of heating or air conditioning.
- Landlord Flood Insurance: Landlords who own property in flood prone areas may be required to purchase flood insurance by their mortgage company. However, almost anyone can add flood insurance to their homeowners or landlord policy at an additional cost.
- Loss of Rents: You may also be able to add coverage for loss of rents, which can provide much-needed income if your rental becomes uninhabitable for a covered reason.
Landlord Insurance vs. Renter's Insurance
As you compare different coverage options for landlords, it's also important to understand the differences between what landlord insurance and renter's insurance cover.
Where landlord coverage is meant to provide protection for the building and potential liability claims, renter's insurance policies provide coverage for actual belongings kept within the home.
As an example, renter's insurance aims to cover losses of a renter's personal belongings due to theft, certain natural disasters, damages caused by water backup and more. This coverage can apply to a renter's furniture, clothing, electronics and other belongings, although deductibles and coverage limits always apply.
The Bottom Line
What does landlord insurance cover? For the most part, this type of insurance was created to provide protection for the building you rent out as well as general liability. In the meantime, you always have the option to add extra coverage options to a policy, such as water damage coverage, equipment breakdown or specialized protection for loss of rents.
Many landlords also opt to purchase a separate umbrella insurance policy for even more protection. This type of insurance extends coverage limits even higher when you need it most, and a consumer may be able to buy up to $1 million in umbrella coverage for a few hundred dollars per year.
Whatever you decide as a landlord, make sure you don't skip on insurance to save some cash. While homeowners insurance for landlords may feel like a waste of money, you'll thank your lucky stars you have quality coverage if the worst case scenario plays out.
