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Illustration about the benefits of landlord insurance

Do You Need Landlord Insurance?

June 10, 2018

As you prepare to rent your property, ensuring you have adequate insurance should be one of the first items on your to-do list. Do you need landlord insurance? 

Ordinary homeowners’ insurance isn’t enough when you become a landlord. Once you begin renting out a property full time, it becomes a business place. Any losses due to fire, storms, or theft probably won’t be covered under your existing homeowners’ policy.  Neither will any settlements you might have to pay if your renter slips or otherwise gets injured in the home.

Having a landlord insurance policy in place before your tenant signs the lease is critical.

Do You Really Need Landlord’s Insurance?

You will need to switch to a landlord’s dwelling policy in most cases. If you’re only renting out your home a couple of weeks out of the year or living in the property with tenants, you may be able to keep your homeowners insurance and add an endorsement to the policy. Be sure to check with your insurance agent. 

Typical coverage

Many insurers offer varying levels of protection for landlords, from basic coverage for fire damage to more comprehensive coverage for a variety of possible losses, including storm damage and even damage done by tenants, according to Bankrate.com.  Basic policies will pay only the current depreciated value of lost or damaged property, such as roofs, appliances, and fixtures.  Comprehensive policies will typically pay what it costs to replace these items.

Liability coverage

Landlord policies also provide liability coverage that protects you if your tenant or anyone else is injured on your property.  It will cover costs such as judgments from lawsuits, settlements, and attorney fees, up to the policy’s limits.

To protect owners, Gordon James Realty requires that owners we partner with have at least $500,000 in liability coverage. Many experts suggest $1 million in liability coverage.

You may want to consider additional liability coverage through an umbrella policy, especially if you own multiple rental properties.

Insurance for the loss of rental income

If you can’t afford to miss a monthly rent check, make sure your policy would provide coverage for lost rental income if property damage requires your tenant to temporarily move out.  This coverage will pay your rental income while the property is being repaired for damage caused by something that your policy covers, such as a fire.  

Cost

According to the Insurance Information Institute, landlord policies can cost 25 percent more than a homeowners’ policy.

Check with your current insurer and look into any discounts they may provide, such as a deal for using them for multiple homes or cars. It also makes sense to do some research and make a few calls to compare offerings and prices. An experienced, professional property management company can share what’s typical and help you get started.

Consider the coverage options and deductibles.  Balance the policy’s annual cost against what you believe you could afford to pay out of pocket in case the worst happens.

Renters insurance for your tenants

Be sure your tenant understands that your landlord policy won’t cover their personal belongings, including furniture, clothing, and electronics, in the event of theft, fire, or other damage. In addition to owners’ policies, Gordon James Realty requires all tenants to carry renters insurance and recommends that all rental property owners have the same requirement.

Need help figuring out your own insurance exchange? Talk to us at Gordon James Realty.

 By Jill S. Gross

SEO Strategist at Help Scout, where we make excellent customer service achievable for companies of all sizes. Connect with her onLinkedIn or Instagram.