As a landlord, it is important to prepare for the worst. Whether it’s fires, earthquakes, or hailstorms, what can happen will happen. To protect yourself and your property, you need to get landlord insurance. It’s a sure-fire way to safeguard your investment in case disaster strikes.
What is landlord insurance?
Landlord insurance is a policy for property owners who lease a home that they own. It protects property owners from the risks associated with renting out an investment property, such as loss of rental income, tenant-related damage, natural disasters (e.g. floods and hurricanes), and the like.
Is landlord insurance the same as homeowners insurance?
The short answer is no. Homeowners insurance covers properties that are presently occupied by the owner. It protects someone’s home from the damage that may occur to the structure itself and their personal belongings. For instance, if a fire burns down the house, the homeowner can file an insurance claim to offset the costs of rebuilding the home. However, the insuree must have considered the home to be their primary residence.
It also includes liability coverage for accidents that were not caused by negligence. For example, if a guest slipped in the homeowner’s driveway, their insurance policy would pay for the guest’s medical bills and other damages.
On the other hand, landlord insurance covers properties that are occupied by tenants. This means that the landlord does not have to reside in the same property as their tenants. Just like homeowners insurance, it provides property and liability protection, but it covers only rental-related losses.
For instance, when a landlord keeps personal property in his rental home (items that are not essential for day-to-day upkeep), these are not protected by their landlord insurance in the event of peril, such as theft, fire, and vandalism.
What does landlord insurance cover?
Landlord insurance provides protection against rental-related risks, including:
#1 Tenant Damage
Your landlord insurance policy may protect you from intentional or malicious damage done to your property. This contemplates serious damage, hence it does not include ordinary wear and tear. For instance, if a tenant punched a hole in the wall, the landlord insurance policy should be able to cover the cost of repairs. Unintentional damage, such as dents and scratches on the wall, are typically not covered by landlord insurance. That’s why many landlords require their renters to pay a security deposit.
#2 Building Cover
Natural disasters can destroy your rental property. In the event of an earthquake, flood, fire, or other calamities, you’ll need landlord insurance to protect you financially. Landlord insurance can help offset the costs to rebuild or repair your home.
It’s important to note that not all insurance policies include building cover. For instance, in states that experience year-round flooding, insurance companies may consider the risk too high. This is why it’s important to ask a property manager to explain to you the details of the insurance policy.
#3 Contents Cover
Is your rental property furnished? Does it come with appliances such as a washing machine, television, and oven? If you answered yes to either of the questions, you may want landlord contents insurance. It covers the cost of repairing or replacing items that you, the landlord, provided your tenants.
It includes everything from couches, dining tables, carpets, beds — basically, anything you can find at IKEA. However, it doesn’t cover furniture or appliances that your tenants brought into the property. Your landlord insurance won’t cover the items that they own. It’s called landlord insurance, not landlord-and-tenant insurance.
#4 Loss of Rent
Sometimes, a “bad” tenant slips through even the most meticulous screening process. When you’re forced to evict that tenant, you’ll have to start from square one. Landlord insurance allows you to focus on finding a replacement tenant without worrying about losing money.
Also known as “rent loss insurance”, it also protects you if your property becomes uninhabitable. This may happen after unexpected events such as a fire or flood.
Landlord insurance also protects you in case a tenant is injured on your rental property. For instance, if a tenant falls down the stairs due to faulty handrails, your insurance policy will be able to cover their medical expenses. Landlord liability insurance also includes the legal costs in the event that the tenant sues for damages.
#6 Other Covers
Depending on your insurer, you may be able to add more coverages to your landlord insurance policy. These include coverage for burglary, vandalism, building codes, and so on. Talk to your property manager to learn about the insurance coverages that are available to you.
When do you need landlord insurance?
Short-term rentals usually do not require landlord insurance. If you’re planning on renting out your home for a few days or weeks, your homeowners insurance may be able to protect you from risks such as windstorms and break-ins. However, keep in mind that you should continue to live in the home. Otherwise, you may not be able to obtain a homeowners insurance policy.
If you’re planning on renting out your investment property indefinitely, you may want to obtain landlord insurance. In this scenario, it’s unlikely that your homeowners insurance policy will be able to cover tenant injury and other related risks.
What about renters insurance?
Landlord insurance does not protect the tenant’s personal property. Hence, if a tenant wants to safeguard their belongings from perils such as fire and theft, it is strongly advised that they get a renters insurance policy. Not only does it protect their property, but it also protects them in the event that they injure or damage the rental property.
If you have existing tenants, you may want to ask them to get renters insurance. If you’re in the process of screening prospective tenants, consider requiring them to get renters insurance before they can move in.
Anything can happen to your rental property. Hence, it’s in your best interest to get landlord insurance. It may be expensive but it guarantees protection from the unexpected. It’s one of the best ways to guard your real estate investment.
If you’re having a hard time figuring out the type of insurance policy that you need, ask the property managers at Luxury Property Care. We will evaluate your home to determine the ideal insurance covers to include in your policy.