Landlord Insurance Guide: Costs & Coverages

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What You Should Know

  • Landlord insurance is used for long-term rental properties.
  • Landlord insurance typically protects the property and general liabilities that may fall on the landlord.
  • On average, landlord insurance costs approximately $1,500 annually.
  • Many insurance companies offer additional liability protection for an extra fee.

What is Landlord Insurance?

Landlord insurance is usually used for rental properties such as single-family homes and condominiums, and it helps the landlord to protect their rental assets. The policies of landlord insurance vary depending on a provider and a plan, but most of the time they cover property damages and provide protection from general liabilities.

Landlord Insurance Coverage
Protection TypeWhat It Covers
Property ProtectionPhysical property including the main dwelling, other structures that are detached from the main dwelling and personal property for rental maintenance.
Liability ProtectionLiabilities that arise from lawsuits made by tenants or other people occupying the property.
Additional Protection (Optional)Losses that arise due to building code changes, construction delays, vandalism damage, burglary and others.
landlord insurance

Landlord insurance usually focuses on long-term rental properties. This means that if a landlord has a frequent short-term rental property such as Airbnb, landlord insurance is not appropriate insurance for the property. The same applies to infrequent short-term rentals. Infrequent short-term rentals appear when a landlord rents out their property while they go on a vacation or any other type of trip. In this case, the landlord may contact homeowner’s insurance providers and see if they are willing to cover for the short-term tenants. Only when the property is rented out to people on a long-term basis, the landlord of the property should consider getting landlord insurance. Even if the property is rented out on a long-term basis, before getting the insurance, a landlord should estimate the impact of the insurance on net operating income. Some companies may offer prohibitively expensive insurance that may affect net operating income greatly and may not provide any significant benefit to the landlord. That’s why it is best to shop around and compare landlord insurance providers for the best rates and coverage options.

Unlike homeowner’s insurance, landlord insurance is specifically designed for rental properties. Traditional homeowner’s insurance usually covers only owner-occupied properties while landlord insurance helps landlords to protect their leased properties against damages and, in some cases, loss of rental income.

What Does Landlord Insurance Cover?

There are usually two sections outlined in landlord insurance policies that cover different types of risks. These sections include Landlord Property Protection and Landlord Liability Protection.

Landlord Property Protection

This section typically discusses what property is physically covered by the insurance. This coverage may include the property itself and any equipment that is kept in the property. Just like with any insurance, there are limits on the amount the insurance will cover. These limits differ depending on the insurance plan and specific property. A limit is the maximum amount insurance will cover in the event of damage. If the limit is reached, the landlord must cover the rest using their funds. Each coverage section usually has its limit, and a landlord may set their limits to some of the sections. Usually, the property protection sections include:

  • Personal Property for Rental Maintenance: If a landlord leaves equipment for maintaining a property, it may also be covered by the insurance. This equipment includes a lawnmower, snow-blower, vacuum cleaner, and other tools to repair and maintain the property. On the other hand, if a landlord leaves their personal belongings that are not used for maintenance, it is unlikely that the insurance will cover damages to personal belongings regardless of whether they are intentional or not.
  • Dwelling: This protection helps to repair the damages in a leased property. The coverage usually includes unintentional damage caused by fire, lightning, water, and others. If damage is caused by the negligence of the tenants or the landlord, the insurance company will not pay for the repairs.
  • Other Structures: This coverage helps to pay for any damages to structures that are detached from the main rental property. These structures may include fences, detached garages, and other detached structures as long as they are covered by the insurance. Just like with the dwelling coverage, the damage must be unintentional to qualify for coverage.

Landlord Liability Protection

The landlord liability protection helps the landlord cover the medical bills or legal expenses if someone else was injured on the rental property and the landlord is found responsible. Just like with property protection, liability protection has a coverage limit. If the bills exceed the limit, then the landlord has to pay for the rest.

An example of liability coverage is as follows. If a tenant falls down the stairs and breaks a hip because the stair railing was broken, the landlord may be found liable for the broken hip. In this case, the landlord must pay for the medical bills of the tenant. If the medical bills do not exceed the coverage limit of the insurance, then the landlord only has to pay the deductible amount associated with the claim. On the other hand, if the medical bills are larger than the coverage limit, then the landlord is liable for the difference between the medical bills and the coverage limit.

Additional Coverage

Some insurance companies may offer additional insurance coverage for an extra payment. These services will enhance the protection of the rental property. It may be useful for landlords who believe that their property is subject to risks that are not covered by regular landlord insurance. Different insurance companies may offer different additional coverages, but the most popular ones are as follows:

  • Building Codes Changes: In the event where a landlord has to repair their property, if building codes have changed, then they might have to replace additional parts of the building that are not necessarily damaged. This is because of the change in standards that new buildings must adhere to. In this case, the coverage for building codes changes pays for all the replacements needed to adhere to new building codes as long as the replacements do not exceed the coverage limit of the insurance.
  • Vandalism Damage: Vandalism coverage pays for repairs of intentional damage to the property made by a third party. Usually, regular landlord insurance does not cover vandalism damage. On the other hand, many insurance companies offer this as additional protection.
  • Rental Property Under Construction: If a landlord has a property under construction that will be used as a rental property, then it is possible to insure the property for the time while it is under construction. If the property gets damaged during the construction period, the insurance company will pay for the repairs needed.
  • Burglary Protection: Typical landlord insurance usually covers the costs of repair needed after a break-in. On the other hand, they do not cover the items stolen during the burglary. This additional protection covers the value of the items stolen in the event of a burglary. The items are covered up to the coverage limit set in the insurance contract.

Cost of Landlord Insurance

Landlord insurance may be costly, and it will probably have a significant effect on rental property ROI. On average, landlord insurance costs around $1,500 annually. The actual price of landlord insurance varies state by state. It is possible to receive some discounts for landlord insurance. It might be possible to receive a claims-free discount for up to five years of not having any insurance-related claims. A landlord can also get a discount by installing safety devices that may prevent potential damages. These devices may include burglar alarms, motion sensors, or fire sprinkler systems. A landlord may also receive a bulk discount if they insure multiple properties at once. Some companies allow reducing the cost of landlord insurance by increasing deductibles. The higher a deductible is, the lower the premium will be because the policyholder is personally responsible for the larger amount of money before insurance pays.

Landlord insurance is about 25% more expensive than homeowner’s insurance. It is usually more expensive than homeowner’s insurance because tenants tend to be less cautious about maintaining the property they live in, so they are considered riskier. Data also shows more claims associated with rental properties than with owner-occupied ones. These 2 factors explain why landlord insurance is more expensive than homeowner’s insurance.

Landlord Insurance Example

To understand more clearly how landlord insurance works, we can look at the real-world example of the insurance policy. Suppose a landlord who is renting out a house recently received a landlord insurance offer. The contents of the offer may vary depending on the insurance company, but it is likely to have a similar format as the offer below.

people meeting

This offer provides two types of coverages: property coverage and liability coverage. Property coverage refers to the coverage of physical assets such as buildings and personal property. Liability coverage refers to the liability a landlord may be required to pay due to certain circumstances.

In the example above, we can see that each covered item has a limit, a deductible and a premium. A limit refers to the maximum amount covered by the insurance. For example, a dwelling unit is covered with a limit of $600,000. This means that if the dwelling is damaged by more than $600,000, the insurance company will cover the damages for $600,000 only. A deductible refers to the amount a landlord will have to pay to exercise the coverage option. For example, if a personal property has been damaged, the landlord may request the insurance company to cover the losses for $500. This means that if the amount of losses is not greater than $500, then the landlord is better off not exercising the coverage option because they will receive less than they would have to pay. Lastly, premium refers to the yearly amount the landlord has to pay to be insured for each item. To illustrate, if the landlord wants property to be insured from burglary, they would have to pay $150 per year to stay insured.

In our example, the landlord chose an extensive coverage that covers the property against multiple events such as vandalism, burglary and others. Additionally, the landlord has a personal liability and medical bills coverage in case someone gets injured on their property. Every coverage item has a certain premium associated with them. Each item premium is charged by the insurance company and is calculated based on the limit amount and deductible amount of the item covered.

Any calculators or content on this page is provided for general information purposes only. Casaplorer does not guarantee the accuracy of information shown and is not responsible for any consequences of its use.