Guide to Landlord Insurance: Coverage, Costs, and Considerations
Residential Property Management

Guide to Landlord Insurance: Coverage, Costs, and Considerations

As a property owner preparing to rent out your property, ensuring you have the right insurance coverage in place is a crucial step. This raises the question: Do you need landlord insurance?

Ordinary homeowners' insurance proves insufficient once you become a landlord. When you rent out a property full-time, it becomes a business establishment. Losses resulting from fire, storms, or theft might not be covered under your existing homeowners' policy, nor would any potential settlements you may have to pay if a tenant suffers an injury on your property.

Securing a landlord insurance policy before your tenant signs the lease is essential.

Do You Really Need Landlord Insurance?

In most instances, you'll need to switch to a landlord's dwelling policy. However, if you rent out your home for only a few weeks per year or share the property with tenants, you may be able to keep your homeowners insurance and add an endorsement to the policy. Consult with your insurance agent to determine the best approach.

Typical Coverage

Insurers offer varying levels of protection for landlords, from basic coverage for fire damage to more comprehensive coverage for a range of potential losses, including storm damage and tenant-caused damage, according to Bankrate.com. Basic policies generally pay only the current depreciated value of lost or damaged property, such as roofs, appliances, and fixtures. Comprehensive policies typically cover the cost of replacing these items.

Coverage for Natural Disasters

Depending on your property's location, you may need to consider additional coverage for natural disasters, such as earthquakes, floods, or hurricanes. Standard landlord policies typically exclude these events, so it's important to discuss your options with your insurance agent to ensure you're adequately protected.

Liability Coverage

Landlord policies also feature liability coverage that protects you if a tenant or anyone else suffers an injury on your property. This coverage addresses costs like lawsuit judgments, settlements, and attorney fees, up to the policy's limits.

Gordon James Realty mandates that partnering owners have at least $500,000 in liability coverage, with many experts advising $1 million in liability coverage.

If you own multiple rental properties, consider additional liability coverage through an umbrella policy. This type of policy provides added protection beyond the limits of your standard liability coverage, safeguarding your personal assets in the event of a significant claim.

Insurance for Loss of Rental Income

If you cannot afford to miss a monthly rent payment, ensure your policy includes coverage for lost rental income in the event that property damage necessitates your tenant's temporary relocation. This coverage compensates for your rental income while the property is being repaired for damage caused by an event covered by your policy, such as a fire.

Cost

Landlord policies can cost 25% more than homeowners' policies, according to the Insurance Information Institute.

Inquire with your current insurer about any discounts they might offer, such as deals for bundling multiple homes or cars. It's also wise to conduct research and make a few calls to compare policies and prices. An experienced, professional property management company can provide industry insights and assist you in getting started.

Take into account the coverage options and deductibles, and weigh the policy's annual cost against what you could afford to pay out of pocket in a worst-case scenario.

Renters Insurance for Your Tenants

Make sure your tenant understands that your landlord policy does not cover their personal belongings, including furniture, clothing, and electronics, in the event of theft, fire, or other damage. Alongside owners' policies, Gordon James Realty requires all tenants to carry renters insurance and recommends that all rental property owners enforce the same requirement.

In conclusion, landlord insurance is a necessary component of renting out your property. With various coverage options available, it's essential to understand your specific needs and work with an insurance agent to find the right policy for you. Be sure to consider factors such as liability coverage, natural disaster protection, and loss of rental income coverage when choosing a policy.

Additionally, educate your tenants on the importance of obtaining renters insurance, as it protects their personal belongings and provides them with peace of mind. By taking the time to research and compare different insurance policies, you can ensure that you have adequate protection in place for your rental property, safeguarding your investment and providing a secure environment for your tenants.

If you need assistance in understanding your insurance options, consider contacting Gordon James Realty.

Looking for property management services in your area?

Discover our services and fees from one of our experienced agents. We provide management and brokerage services for community associations, residential properties, and commercial properties.

GET IN TOUCH

Landlord Insurance
Landlord guide
Residential Property

You may also like

The Benefits of a Programmable Thermostat for Rental Properties
September 4, 2023
Residential Property Management

The Benefits of a Programmable Thermostat for Rental Properties

Explore the benefits of installing a programmable thermostat in rental properties: boost tenant satisfaction, conserve energy, and save on costs.

Learn more
Storm Aftermath: Steps to Safely Restore Your Property
September 1, 2023
Residential Property Management

Storm Aftermath: Steps to Safely Restore Your Property

Restore your property safely after storm damage. Dive into our systematic guide on recognizing risks, handling trees, drainage checks, and long-term landscape planning.

Learn more

Ready to make the switch?

We're proud to make partnering with us easy. Contact our team to connect with one of our industry experts and get started today.