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What Is Landlord Insurance?
Regular homeowners insurance does not cover rental properties. Landlord insurance is needed to protect the property in the case of financial loss that may result from damages to the rental property due to fire, break-in, severe weather, and more.
You can also get rent guarantee insurance to cover lost income in the event of necessary eviction proceeding or should the property becomes uninhabitable due to circumstances outside of your control.
What Does Landlord Insurance Cover?
Landlord insurance provides several important types of coverage. The actual coverage that you get depends on your policy and whether or not you choose to purchase optional extras. Generally, landlord insurance will cover the following:
Property damage: This covers damage to your buildings and personal property due to fire, storm damage, theft, vandalism, and tenant damage. Ideally, your landlord insurance will cover the replacement costs for your entire rental property in the event of a total loss.
Liability insurance: This coverage protects you against liability claims and lawsuits. Whether a tenant, visitor, or even a trespasser is injured on your rental property, you could find yourself in a legal mess. Your liability insurance will help you cover the costs associated with bodily injury claims on your property.
These costs can include medical payments, funeral costs, legal fees, and judgment or settlement costs. You will also be covered if you, as the landlord, are found responsible for another person’s property damage.
Additionally, your policy may cover (or may be an optional extra):
Loss of income: This insurance will help compensate you for lost income in the event that a rental property becomes uninhabitable due to a covered loss, such as a storm or apartment fire. Your loss of income coverage, or “rental reimbursement,” will prevent you from losing the income you would have had if you were collecting rent.
Optional coverage: As a landlord, you can buy additional coverage, such as rent guarantee insurance, natural disaster insurance, employer liability insurance, and landlord contents insurance to cover your personal property items such as furnishings or carpet in the rental property.
How Does Landlord Insurance Work?
Landlord insurance is essential for protecting you and your property from property damage and liability claims.
Rental property damage: The landlord insurance policy can help you pay for repairs should events outside of your control cause substantial damage to your building.
However, your damage coverage has limits - make sure to read the fine print and ensure your policy covers everything you need. For example, if your property is in a flood-prone area ensure it has flood coverage.
Additionally, some policies will pay for tenant damage, and some will not. Taking a rental deposit at the time your tenant signs a lease is a good idea.
Landlord liability: If a visitor is injured on the property you could find yourself liable. The incident may fall under the tenant’s renters insurance, but if the incident is due to negligence on your part such as a broken step on a stairway the liability call falls on you. In this case, the visitor could file a claim against your insurance policy to cover the costs of medical care.
If the injury is severe or the negligence considered egregious, the visitor may file a lawsuit against you. Your landlord insurance can cover your costs up to the limits on your policy after your deductible amount is paid.
Do I Have to Have Landlord Insurance?
While landlord insurance is not required by law it is highly recommended. Additionally, many financial lenders will require a landlord insurance policy before lending to you.
It is important to know that your homeowner’s policy most likely will not cover damage to your rental property unless you are only renting out a portion of the home you are living in. It will also likely not provide coverage for liability claims.
How Much Is Landlord Insurance?
Landlord insurance policies can vary broadly depending on the location, size of the property, and the kind of coverage you get. For smaller rentals you may see policies from as little as $500 a year, for larger properties, this could range up to several thousand. It’s always worth exploring your options to ensure you get the best possible policy for the best possible price.
Some of the factors that will affect your premium costs include:
Your geographic location and any known risks in the area
The size of the structure
How many rental units do you have
The age and condition of the building
Whether your electrical wiring is up to current code
Whether you allow smokers to rent from you
Whether your complex has a swimming pool
The type and amount of coverage you are purchasing
Whether you have fire sprinklers installed in your rental units
Whether the complex has gated access
Whether you have burglar alarms
Is Landlord Insurance Tax Deductible?
Any landlord insurance premiums that you pay are tax-deductible as your insurance premiums are considered a business expense.
Can Landlords Require Renters Insurance?
Again there are no legal requirements for tenants to get renters insurance, for optimum protection it is recommended for them to do so. Renters can get very affordable renters insurance policies for as little as $5 a month.
In most states, landlords can require tenants to get renters insurance if they write it into the lease and they may even require proof. However, it is a good idea to check with your local and state statutes.
Where Can I Get Landlord Insurance?
There are numerous landlord insurance policy providers across the US. Explore your options to ensure you get the best coverage for the best possible price.