Rental properties fall in an unusual nexus between the worlds of business and real estate. While you may own the rental property and retain the deed to the space, you also exchange a certain amount of rights and freedoms when you decide to rent out your home. As a result, landlords have a number of liabilities and hazards that might not be covered by even the best homeowners insurance policies.
If you’re planning on renting out a home, do your due diligence to save yourself time, stress and money later down the line. We’ve created a crash-course on everything you need to know about landlord insurance as well as a guide to some of our favorite landlord insurance providers.
Best Landlord Insurance:
- Best Overall: Allstate
- Best Commercial Policies: American Family Insurance
- Best Customer Service: State Farm
- Best Claims Process: Safeco
- Best for Inflation Protection: Liberty Mutual
- Best for Flexible Coverage: American Modern
What’s Landlord Insurance?
Like homeowners insurance, landlord insurance protects you against loss resulting from damage to your property while it’s being rented by tenants.
Landlord insurance policies often differ from homeowners insurance policies because they usually cover damage done intentionally to your property by irresponsible tenants, whereas most homeowners insurance policies explicitly deny coverage for any intentional acts done to the property.
Also like homeowners insurance, you’ll usually pay two costs when you maintain coverage: a monthly premium as well as a deductible when you file a claim.
The specifics of what’s covered in your landlord insurance will depend on the insurance provider that you choose and your individual policy. However, most plans include the following three levels of coverage as a baseline:
Dwelling coverage is the most basic form of insurance and should be included in every landlord insurance policy. Dwelling coverage protects you from damage incurred to the exterior and interior of your property.
It may cover furniture and possessions that you provide if you are advertising a pre-furnished space but most policies limit coverage to the exterior of the building and the functions of the home, including plumbing, electrical systems and fixed appliances.
Most landlords advise tenants to purchase their own renters insurance policy if they’d like to have coverage for their personal property contained within the unit.
Medical and Legal Liability
If a tenant or a contractor hired to do work on your property is injured, he or she may be able to sue even if the cause of the injury was largely out of your control. Like homeowners liability insurance, medical and legal liability protection can help you avoid paying for fees and representation out-of-pocket medical expenses.
Liability insurance is especially important for landlords because as a property owner, you are probably on site every day to make sure that all of your liabilities are covered.
Who Needs Landlord Insurance?
Lost rental income protection gives you the value of the rent you’d normally receive from tenants in the event that your rental property becomes totally unlivable.
For example, a property you own might be rented out for $1,000 and is suddenly stricken by a termite infestation. Insurance policies with lost rental income protection will offer you a payout of $1,000 that you’d normally receive in rent until the problem is fixed and you’re able to move your tenants back in.
Additional protections that your policy may offer as add-ons include:
Guaranteed Income Insurance
Did your tenant skip out on rent this month? Guaranteed income insurance can help you recoup the remainder of the rent that they failed to pay.
In the same way that many homeowners insurance policies don’t cover flood damage, landlord policies severely limit the amount of money that you can recover in the event that your rental unit is flooded.
If your rental property is situated near a lake or creek or is located in another area that’s prone to flooding, make sure your policy includes flood protection.
Emergency Repair Coverage
Emergency repair coverage helps pay contractor bills in the event that a tenant needs a sudden repair, like when a pipe bursts or a hot water heater goes out.
If you handle your repairs yourself, emergency repair coverage will help you recoup the costs of materials you used to correct the problem as well as gas and other costs you incurred while traveling to the property.
How Much Does Landlord Insurance Cost?
Estimates have found that the average American pays about $1,100 per year in home insurance but landlords can usually expect to pay between 20 and 30 percent more for their landlord insurance.
This is because rental properties are damaged more often than homes occupied by their owners. This increases the liability on the insurance company and results in a higher premium for you.
The cost of landlord insurance is also dictated by a number of other factors, including:
- The value of your rental property and the cost of replacements
- Whether or not you allow short term or student rentals (short term rentals increase the possibility of encountering a bad tenant and results in a higher premium)
- Your rental property’s proximity to fire departments and police stations
- Crime statistics for the area
- The current condition of your rental property
- The geographic location of your rental property
What to Look for in a Landlord Insurance Company
Replacement Cost Value
Some landlord insurance policies offer property owners a standard lump-sum payment or “actual cash value” (the estimated price that your home is worth after depreciation) to repair damage that they’ve incurred.
Instead, look for a policy that includes replacement cost, which will offer you a payment equal to what you’ve actually spent rebuilding or repairing your property.
Some Level of Personal Property insurance
While personal property insurance is an absolute must for landlords who rent out pre-furnished units, you’ll want to maintain at least some level of personal property insurance if you’ve included any form of furnishing in the home.
Commonly-forgotten items like rugs, curtains or counter appliances are usually not recoverable if you don’t have personal property insurance.
Acts of God Coverage
Some insurance policies exclude coverage for “acts of God,” which may include flooding, sinkholes, tornados, tsunamis and hurricanes, depending on the policy.
If you live in an area that’s prone to any one of these concerns, be sure to carefully read your policy and understand what’s covered and what isn’t.
The Best Landlord Insurance Companies
Take a look at the companies who make the best landlord insurance.
You might already have homeowners insurance for your personal dwelling from Allstate, but did you know that the insurance provider also offers landlord insurance policies as well?
Landlord policies from Allstate are comprehensive and can include dwelling protection, coverage for non-home buildings on your rental property, liability coverage, fair rental income insurance and burglary coverage.
Their rental property insurance even offers optional rental property under construction insurance (which can cover the costs of relocating tenants while you make upgrades or urgent repairs to the space) and building code insurance (which helps cover the costs of ordinances and city code inspections in the event that you decide to upgrade the building).
Allstate’s policies also include flood protection as an optional add-on and umbrella policies for landlords that are particularly concerned about the costs of being involved in a lawsuit.
With over 80 years of experience and a wide breadth of insurance options, Allstate is a quick and reliable choice for any landlord — and you might even be able to save on your personal insurance if you already have an Allstate policy by bundling your home and landlord insurances together.
2. American Family Insurance
American Family Insurance is a household name for its homeowners insurance, but it also offer comprehensive commercial landlord insurance policies.
You can customize coverage for the rental structures you own and for general liability. There is also additional coverage available like flood insurance and coverage for outbuildings like sheds, fences and garages. You can also bundle your landlord insurance from American Family Insurance with a commercial umbrella policy that covers you for limits beyond what your landlord insurance policy offers.
To get a quote, you’ll have to speak with an American Family agent. The extra communication could pay off though, if you bundle your landlord policy with your personal residential coverage, auto insurance or other policies.
3. State Farm
State Farm is another wide-range insurance provider that offers bundling policies for landlords who already have their homeowners insurance through State Farm.
For everyone else, State Farm’s policies are competitive and include a package of policy types. In addition to comprehensive dwelling and general liability insurance, State Farm’s rental property insurance policies also include coverage for other structures on the property with no additional charges or fees.
If your rental space has a pool, fence, detached garage or shed, you should make State Farm one of your top choices for landlord insurance, as typical policies require landlords to pay an additional premium to insure these structures along with the home itself.
One other unique form of coverage offered by State Farm is its optional data restoration and identity protection add-on. Data restoration insurance provides coverage in the event that your electronic system is hacked or compromised, and identity protection helps landlords recover if your identity is stolen and used without consent as a result of the breach.
In a world that’s progressively moving more and more towards online rental payments and maintenance requests, data protection coverage is an innovative idea that can save landlords time and money if you use an electronic payment processing system.
Another policy provider offing bundle discounts, Safeco’s insurance policies are on par with its competitors. The company allows you to adjust your deductible, which can be a powerful tool if you want to maintain insurance but want to lower your monthly premium; simply choose a higher deductible and pay less each month.
Safeco provides actual cash value for replacement and repair costs, and its liability coverage includes legal expenses as well as ordered fees. Safeco also offers multiple tiers of insurance pricing to suit your needs as a landlord.
You know you’ll be covered in the event of a disaster or sudden emergency with 24/7 claims assistance and reporting.
5. Liberty Mutual
Liberty Mutual is a top-rated insurance provider whose coverage options include standard damage and liability protections along with other options like guaranteed rental income and lock replacement costs.
Policies from Liberty Mutual also include fair rental value coverage, which provides housing for tenants at a price equivalent to the amount that tenants pay each month in rent in the event that your space becomes unlivable.
Liberty Mutual also offers a unique form of inflation protection coverage. When you sign onto a policy, Liberty Mutual automatically adjusts your rates and your plans to keep up with inflation rates and the rising cost of home repairs, which adds peace of mind for landlords worried about coverage for an emergency.
Liberty Mutual is a responsive and customer-focused insurance company that’s equally as viable for the landlord with a single property to as it is to the real estate investor with ten homes to manage.
6. American Modern
American Modern offers 2 types of coverage policies: comprehensive coverage and flexible coverage.
Comprehensive coverage is offered for homes up to 80 years old (60 in some states, make sure to check with a representative before you buy) and provides replacement costs for most usual damages seen by rental properties.
Flexible coverage is available for homes of any age and provides coverage for a list of named perils, including fire, lightning, hail and other natural hazards. Both policies cover the dwelling itself, other structures on the property, debris removal and even service charges from the fire department if they need to get involved.
Larger real estate investors may be interested in American Modern’s multi-property coverage option, which is available to real estate investors who own ten or more rental properties.
American Modern’s multi-property protection package allows property owners to quickly insure all of their homes with standard coverage options (including dwelling protection, other structure protection, personal property insurance and basic protections against burglary and vandalism).
You can quickly pay for all of your premiums once a month using direct debit, a check or a credit card payment, and you won’t need to write an individual check or schedule a payment for each of your properties. This can be an additional benefit for busy real estate investors, especially because you can also pay up to a year’s premium in advance at the time of sale.
Find Landlord Insurance Today
Going without protection can put your investment and your livelihood in jeopardy. Some policies will offer you an extra incentive to sign on by bundling your home or auto insurance together with your landlord insurance, making regular updates and repairs to your property or purchasing insurance before you’ve placed tenants in the unit.
No matter which type of insurance policy you choose, the best way to protect your rental property is to choose tenants who respect your space. If you’re a responsive and proactive landlord, you’ll be able to make the most out of your insurance policy and secure a lower premium.
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