It’s likely that your insurance policy only provides coverage for owner-occupied homes, meaning that if you start renting your property to others, your coverage may no longer apply. Additionally, if a tenant is not at fault for a malfunctioning appliance, an injury on the property, property damage caused by a natural disaster, or theft, you could be left responsible for any resulting losses or damages.
Fortunately, landlord insurance is available to address these specific risks. These policies can vary in terms of coverage and features, so it’s important to identify your specific needs and priorities for protecting your rental property before shopping for a policy.
If you own a rental property, it’s important to have rental property insurance to protect your investment. But what is rental property insurance, and why is it so important? In this article, we’ll explore the ins and outs of rental property insurance and provide some tips on how to find the best policy for your needs.
What is Rental Property Insurance?
Rental property insurance, also known as landlord insurance, is a type of insurance that provides coverage for property owners who rent out their properties. It typically includes coverage for property damage, liability claims, loss of rental income, and personal property damage.
Why Do You Need Rental Property Insurance?
As a landlord, you have a significant investment in your rental property. Without rental property insurance, you would be responsible for paying for any damages or losses out of pocket. This could be financially devastating, especially if the damage is extensive or if you face a liability claim. With rental property insurance, you can protect yourself and your investment from these risks.
What Does Rental Property Insurance Cover?
Rental property insurance typically includes coverage for the following:
This coverage protects your rental property from damage caused by fire, lightning, windstorms, hail, and other covered perils. It may also cover damage caused by vandalism and theft.
Liability coverage protects you from claims made against you by a third party for bodily injury or property damage. For example, if a tenant slips and falls on your rental property, you could be held liable for their injuries. Liability coverage can help protect you from the financial consequences of such claims.
Loss of Rental Income
If your rental property becomes uninhabitable due to a covered peril, loss of rental income coverage can help cover the lost rental income during the repair or replacement period.
If you own personal property that you keep on the rental property, such as appliances, furniture, or other items, personal property coverage can help protect you if they are damaged or stolen.
Landlord insurance policies often offer several optional riders that may not be as essential as the primary coverage mentioned earlier, but could still be valuable and cost-effective in the long run.
Guaranteed Income Insurance
This rider can provide coverage for landlords in case a tenant fails to pay rent for a month or more.
This is particularly important for rental properties in flood-prone areas, as standard landlord insurance policies may not cover damage caused by natural disasters or municipal plumbing issues related to flooding.
This feature can be useful in covering expenses incurred when a tenant requests emergency repairs or assistance, such as for a malfunctioning appliance or a lockout.
Additional Construction Expenses
In the event that a building requires repairs or upgrades to comply with building codes after damage has occurred, this rider can help cover the related expenses.
How Much Does Rental Property Insurance Cost?
The cost of rental property insurance varies depending on several factors, including the location and size of the rental property, the value of the property and personal property, and the level of coverage you need. On average, rental property insurance costs between $1,200 and $1,500 per year, but this can vary significantly depending on your specific circumstances.
As of July 2022, the average cost of homeowners insurance is $1,899, as reported by Policygenius. However, the actual cost of insurance can vary significantly depending on several factors such as location, age of the property, and other considerations.
For rental properties, you can generally expect to pay about 15% more for landlord insurance than you would for a standard homeowners policy on the same property, as rental properties are typically exposed to a higher risk of damage and incidents. This estimate comes from Stessa.com, a free real estate investment tracking site.
It’s worth noting that the length of time a property is rented out can also affect insurance premiums. According to Houselogic.com, an informational website affiliated with the National Association of Realtors, insurance premiums can nearly double if a property is rented out for only 12 weeks compared to a full year. The reasoning behind this is that short-term tenants may be less careful or less familiar with the property, which can increase the risk of maintenance issues and other problems. As a result, insurers may view short-term rentals as a higher risk and charge higher premiums.
How to Purchase Rental Property Insurance?
To purchase rental property insurance, you should contact an insurance agent or broker who specializes in landlord insurance. They will help you assess your risks and determine the appropriate coverage for your rental property. Make sure to compare quotes from several insurance companies to find the best coverage at the best price.
If you own a rental property, rental property insurance is an essential investment. It can protect you from a range of risks, including property damage, liability claims, loss of rental income, and personal property damage. By working with a reputable insurance agent or broker, you can find the right policy for your needs and have peace of mind knowing that your investment is protected.