How to Bargain for the
Lowest Landlord Insurance Cost
TLTR: How much does landlord insurance cost? Read on to understand what it is, how to get affordable quotes, and why you shouldn’t rely on homeowners insurance to safeguard your leased property.
Owning rental property and housing tenants comes with countless risks.
You may think you can rely on your homeowners insurance, but we’re here to tell you that won’t cut it. You only have one realistic choice: landlord insurance and liability coverage.
Landlord insurance, also called rental property insurance, is designed specifically to fit the unique risks of those who house long-term tenants. It’s hard enough being a property owner –being a landlord requires you to be extra cautious and more responsible. For instance, faulty wires in your property may cause your tenants to experience frequent power outages, or worse, electric shocks. As the landlord, it’s your responsibility to make sure your rental property is safe and protected.
In this blog
What Will Landlord Insurance Cover?
There are various types of policies and packages available on the market. Most landlord insurance provides the following coverage:
Dwelling insurance will cover the cost of rebuilding or repairing your rental property. This policy also includes liability coverage.
There are three types of dwelling coverage, each more secure than the last.
- DP-1 Basic Policy
The DP-1 policy provides the most basic form of landlord liability coverage. It’s an excellent small-budget option for homes that can’t be insured due to their condition and is a perfect fit for older homes. The policy also covers protection against specified perils such as fire, wind, and lightning.
- DP-2 Broad Policy
The DP-2 policy covers more perils than the DP-1 policy. These additional perils include falling objects, pipe breakage, and water discharge, to mention just a few.
- DP-3 Special Policy
DP-3 offers the most comprehensive coverage out of all the policies and is the best coverage for landlords. It’s similar to a homeowners insurance policy. It covers most of the perils already mentioned in the previous policies, in addition to vandalism and theft. It also includes liability coverage. For instance, your insurer will pay any medical expenses or legal fees if your tenant is injured.
It may be more expensive than the other two, but DP-3 is the most complete insurance coverage a rental property owner could want.
Loss of Rental Income
Periodically, you may need to take your rental properties off the market to make repairs. This coverage will provide you with temporary rental compensation to cover any financial losses while your property is under repair. For instance, fire damage can cause a property to be closed for several weeks, and the coverage would compensate you for those weeks of lost income.
Liability coverage comes to the rescue when you get sued for damage to other people’s property or for the bodily injury of a tenant. It protects you against prospective lawsuits and liability claims. For example, Covered by SAGE’s liability insurance amount ranges from $100K to $500k, and the coverage amount depends on the size of the house.
Insurers commonly provide the above-described coverage. Your insurance provider may also offer other forms of security as optional endorsements or core policies. Though add-on options might vary, here are some additional policies you might want to consider:
Building Code Coverage
If you own an older building or have yet to bring it up to code, building code coverage can save your bacon. Without the coverage, you would have to pay for all the repairs out of pocket.
A landlord policy typically doesn’t cover flood damage. If you live in a high flood–risk area, you should consider buying a flood insurance add-on. It will cover the expenses of repairing or conducting maintenance on the property.
A standard landlord policy does not include earthquake insurance. If you reside in a high-risk earthquake state like Alaska or Hawaii, you should consider purchasing additional earthquake insurance.
Non-Occupancy Dwelling Coverage
If your rental property has been vacant for more than 30 days, your insurance company might not cover any claims for the property. With non-occupancy dwelling coverage, it will help you extend your coverage for that time.
You guessed it, this offers you protection in the event of an emergency. It’s for times when your tenant calls you to fix a broken pipe that’s gushing water, or they accidentally got locked out of their house or apartment. This added feature will cover some parts of the cost you incurred to travel to the property and fix the problem.
Landlord Insurance VS Renters Insurance
What’s the difference? Landlord policy covers the owner’s dwelling against liability risks and lost rental income. Renters insurance covers the tenants and their personal property and any damage caused to the rental property.
Rental property insurance will cover lost income for landlords, but renters insurance won’t. In the same vein, only renters insurance will cover additional living expenses for the tenant if the rented property needs to be evacuated for repairs.
If you ask us, we’d always recommend purchasing landlord insurance and renters insurance for landlords and tenants, respectively. Both parties have much to lose should accidents or natural disasters occur.
Condo Insurance for Landlords
Do you own a condo unit? Are you renting it out? If your answer is yes, you need landlord insurance!
Your investment needs complete protection. When you’re leasing your unit, you and the tenant share responsibilities. The tenant is responsible for protecting their own personal property and medical bills if any accidents cause injuries inside the unit. Condo insurance (HO6 policy) for landlords will cover any damage to rental properties and loss of rental income.
Landlord and condo insurance policies aren’t completely foolproof on their own. However, they complement each other and keep all involved parties protected.
Landlord Insurance for Commercial Property
If you own properties like office buildings, warehouses, and retail spaces, standard landlord policies may not completely protect you. A commercial property requires commercial landlord insurance coverage or Lessor’s Risk Only (LRO) policy.
But an LRO policy won’t cover you in the case of property damage or injury. It only covers you against claims of damage or injuries inside your property.
Let’s say your tenant runs a beauty salon in your building. One day, she trips on the staircase and breaks her leg. Later, she files a lawsuit against you, claiming that your faulty staircase caused her to break her leg and lose out on a month’s worth of income. Commercial landlord insurance will cover your legal expenses.
Landlord Insurance Rates
The rates for rental property insurance policies vary according to insurance carriers. Value Penguin states that the average cost of the policy is around $1,800 annually. This number is just an approximation because your premium is affected by your coverage options, covered perils, the condition and size of your property, and other factors. You can get a clear idea of what the cost would be for you by consulting an insurance agent that specializes in preparing landlord insurance quotes.
According to Investopedia, here are the top five insurance companies that provide comprehensive and affordable landlord insurance:
Guide to Lowering Landlord Insurance Cost
Landlord insurance can be quite expensive. Luckily, there are a number of ways you can lower your landlord insurance cost:
- Maintain your property: Over time, your property will need repairs and upkeep. Not properly maintaining your property can cost you higher insurance premiums. If you install smoke alarms, remove any mold, repair broken pipes, and install fire escapes and fire sprinkler systems, among other things, your insurance provider will likely give you discounts.
- Pay higher deductibles: Most insurance companies will agree that increasing your deductibles is a surefire way of lowering your premium. A deductible is the amount of money you’ll be paying before the insurance company covers the claim amount. For instance, if you raise your deductible to $2,000, your landlord policy can be reduced by 10%.
- Bundle your policies: Insurance companies will lower your premium if you purchase more than one policy from the same provider. If possible, bundle multiple policies into one master policy.
- Make renters insurance mandatory: Ask your tenants to get a renters policy for themselves as well. Although doing this won’t directly lower the cost of your landlord policy, your rental property and tenants will be covered. Additionally, you and your tenants won’t have to worry about who will pay for what, as you will both have insurance coverage.
Despite having homeowners insurance for your property, a landlord insurance policy will make sure that your rental property stays safe even though you’re not living in it. Although it won’t cover all the natural disasters or perils, it will still protect you against most vulnerabilities.
If you’re looking for affordable coverage from reliable insurance agents in your location, don’t forget to check out our agent directory.
What Landlord Insurance Do I Need?
Any property owner who wishes to have long-term tenants living in their personal real estate needs comprehensive landlord coverage. If you’re unsure what to get, a standard policy includes dwelling coverage, damage coverage, lost rental income coverage, and liability coverage. If you need more protection, you can ask your insurance agent to add endorsements like guaranteed income insurance, flood insurance, and emergency coverage.
It’s always a good idea to talk to local insurance experts before you make a purchase.
Is Landlord Insurance Tax Deductible?
Yes! Since you’re generating income from your personal property, you can ask for the entirety of the insurance premium to be deducted.
Is Landlord Insurance More Expensive Than Homeowners Insurance?
Yes. A landlord insurance policy will cost you anything from 15% to 20% more than a homeowners insurance policy. Renting out your property exposes you to risks that a homeowners policy won’t cover. For instance, homeowners insurance will cover you in case of accidental fire. However, if you’ve got tenants, your policy will deny your claim. A landlord policy will cover you in that case.
Basically, landlord insurance covers much the same risks as a homeowners policy, but there are important differences. We recommend that you purchase a landlord policy if you’re planning on having tenants for any substantial period of time.
Does landlord insurance cover the cost of evicting a tenant?
In most cases, your landlord insurance won’t cover the cost of evicting a tenant. Luckily, eviction insurance will save you the trouble of paying out of your own pocket if need be.
Does a landlord insurance policy cover the tenants' belongings?
No, landlord insurance doesn’t cover tenants’ personal belongings like clothes, furniture, or electronic devices. However, if you opt for an endorsement (contents insurance), you could protect your own property that you may let your tenants use. For the rest, the tenants should buy renters insurance separately.
Can Landlords Require Renters Insurance?
If you’re looking for tenants, it’s a great idea to require them to buy renters insurance. Your landlord insurance policy provides liability coverage and medical coverage, but it won’t protect the tenant’s personal property, only renters insurance will do that.
But renters insurance can also protect your interests as landlord. For instance, your tenant forgets to turn the oven off before leaving for work. The kitchen catches on fire, destroying a huge part of your building. In this case, your insurance provider won’t be paying for the repairs as it was the renter’s fault. If your tenant has insurance, the repairs will be taken care of by their insurance policy.
Is Landlord Insurance Required?
A landlord insurance policy isn’t mandatory by law. Still, if your kitchen catches fire and you want to avoid the hefty replacement cost, a rental property insurance policy is the way to go. If you’re only interested in short-term rentals, your homeowners policy could protect you for a short period of time. The Insurance Information Institute (III) states that some companies could either allow short-term rental property insurance to the homeowner or ask you to add an endorsement to your existing policy. If you’re looking for long-term rentals, you should definitely invest in landlord insurance.
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