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Landlord Insurance: 18 Top Questions and Answers

1973 views February 14, 2024 Karina Jugo 3

As a landlord or property manager, protecting your rental properties with the right insurance coverage is crucial, but navigating the world of landlord insurance can be confusing. Many landlords have questions about what kinds of policies they need, what’s covered or not covered, and how to handle insurance costs and claims.

In this FAQ resource article, we’ll walk through the common questions landlords and property managers frequently ask about getting the most suitable insurance protection for their rental properties. Whether you’re a seasoned property manager or a first-time landlord, you’re likely to find some useful insurance info here.

1. What is landlord insurance?

Landlord insurance refers to specialized insurance policies that provide coverage for rental properties and their owners. Unlike standard homeowner’s or renter’s insurance, landlord insurance is designed specifically for the unique risks and liabilities involved with owning a property for the purposes of renting or leasing.

Most landlord insurance policies bundle together coverage that helps protect rental property investments against a variety of issues, such as building and structural damage from natural disasters or other incidents like fires or water leaks.

Policies also commonly include liability protection in case a tenant is injured on the rental property premises. Some even offer coverage for loss of rental income if the property becomes uninhabitable for a period of time.

Having the right landlord insurance ensures owners and investors have safeguards in place to help mitigate the many risks associated with providing buildings and dwellings for tenant rental.

2. Is landlord insurance necessary for rental property?

Landlord insurance is not legally required by any federal or state law for rental property owners in the United States. However, landlords must understand that many mortgage lenders and property management companies often require landlord insurance as part of their terms and conditions.

Additionally, even when not mandated, having landlord insurance is highly recommended to protect against potential liabilities and property damage that may occur during rental periods. Some landlord insurance policies can even protect against loss of rent in case the unit is deemed unlivable.

Having landlord insurance is an essential best practice to help safeguard rental real estate assets and mitigate the many risks property owners face when leasing out units. Having the appropriate coverage amount protects both landlord/property manager and tenants in certain scenarios.

3. Do I need landlord insurance if renting to a family?

Renting to a family doesn’t exempt a property owner from potential risks such as property damage, liability claims, or unexpected events and accidents that could lead to financial losses.

While renting to a family might seem less risky compared to renting to unrelated individuals, unforeseen events can still occur. Landlord insurance helps mitigate these risks, offering financial protection and peace of mind for property owners, regardless of the tenants’ familial status.

4. What do standard dwelling insurance policies cover?

Standard dwelling insurance policies typically provide coverage for the structure of the dwelling itself, including the walls, roof, floors, and built-in appliances.

This coverage extends to protect against a range of perils, such as fire, windstorm, hail, lightning, vandalism, and certain types of water damage. Additionally, dwelling insurance typically includes coverage for detached structures on the property, such as garages, sheds, or fences.

While dwelling insurance primarily focuses on the physical structure of the property, it may also offer limited coverage for personal property belonging to the property owner that is used for maintenance or upkeep of the dwelling.

However, it’s essential to note that standard dwelling insurance policies do not typically cover personal belongings of tenants or liability claims arising from tenant injuries or property damage.

For comprehensive protection in rental situations, landlords should consider landlord insurance, which includes coverage for these additional risks and liabilities. Moreover, it is standard practice for landlords to encourage or require tenants to purchase renter’s insurance.

landlord insurance

5. What is renter’s insurance? Is it required for every lease?

Renter’s insurance, also known as tenant’s insurance, is purchased by tenants to protect their personal belongings and provide liability coverage while renting a property. It typically covers belongings such as furniture, electronics, clothing, and personal items against perils like theft, fire, vandalism, and certain types of water damage.

Renter’s insurance also offers liability coverage in case a visitor is injured on the rented property and the tenant is found legally responsible. However, it does not provide coverage for the structure of the building itself, as that is the landlord’s responsibility.

Renter’s insurance isn’t mandated by any federal or state law but strongly suggested for most rental leases. There are plenty of examples of how you can add this to your lease, but here is one way you might do it.

LIABILITY: We will not be liable for any damages, loss, or injury to persons or property within your apartment or on the premises. Although there are entrance and exit gates for the apartment community, they do not significantly limit access to the property by anyone. Sometimes, they do not work due to malfunction or damage. In addition, access is not restricted by a wall or fence. You are responsible for obtaining your own casualty and liability insurance. Concerning your family or invitees, you agree to hold us harmless and indemnify us from liability. WE STRONGLY RECOMMEND THAT YOU SECURE INSURANCE TO PROTECT YOURSELF AND YOUR PROPERTY. The provisions of this lease bind your successors, heirs, beneficiaries, and personal representatives.

In this example, the renter’s insurance is not required; however, it bluntly states that the renter is responsible. Most state laws will uphold a landlord requiring renters’ insurance as a lease provision. As a condition of the lease, it is considered a reasonable request. 

6. What does landlord insurance cover?

Every policy is different, but there are a few main areas that insurance for landlords covers:

A. Property Damage

This coverage refers to damage to your buildings and personal property. Theft, vandalism, tenant damage, fires, and storms are covered here. Typically the insurance will cover replacement costs for the entire property, assuming the insurance adjuster decides it was a total loss.

B. Loss of Income

This helps bridge the income gap if a rental property becomes uninhabitable due to a covered loss. For example, let’s say a fire damaged part of the kitchen and will take a month or two to repair. This coverage will provide a rental reimbursement.

C. Liability Insurance

If a liability claim or lawsuit is brought against you, this portion of landlord insurance protects you. It doesn’t matter if it was a tenant or a visitor; you could be held liable for something that happens on your property. Even if the person was a thief or trespasser, you might still be liable!

Liability insurance covers several things: medical costs, funeral costs, legal fees, and settlement fees. Remember that lawsuits against you may come from damage to the tenant’s property, not just injuries.

D. Optional Coverage

You can invest in additional coverage depending on your risk profile. Examples are natural disaster insurance, landlord contents insurance, and rent guarantee insurance. Your insurance agent will be able to explain each of these in-depth and help you decide whether or not they’re a good fit for your properties.

landlord liability

7. Is landlord insurance required by law?

The short answer is no. You don’t need to have landlord insurance. But it would be unwise to go without it just to save a few dollars. Here’s why.

As a landlord, you’re also a business owner. Protecting your business only makes sense, as it supports your livelihood. If something happens to that property and you don’t have it insured, your livelihood is at stake. Fires, storms, vandalism, and liability are things landlords have to face.

Remember that you should still get landlord insurance even if you are just renting out your home or maybe your basement temporarily. Regular home insurance doesn’t cut it because you wouldn’t live in the same residence as the tenant.

8. Homeowners vs. Landlord Insurance: What are the differences?

Homeowners insurance protects homeowners who occupy their own homes, providing coverage for both the structure and personal belongings.

Landlord insurance, on the other hand, is designed for property owners who rent out their properties, offering coverage for the structure, loss of rental income, and liability risks associated with renting out the property to tenants.

9. I’m only renting out rooms or a separate section of my home. Do I need landlord insurance?

This distinction leads to two types of situations to consider if you rent out a portion of your primary home:

A: Renting out a room or rooms

When renting out part of your primary residence, such as two rooms in your four-bedroom home, it’s essential to consider obtaining landlord insurance to adequately protect yourself and your property.  Here is what the Insurance Information Institute (III), a trusted source for insurance-related information, states:

“Owner-occupants who rent out a room or rooms in their home are exposed to the same liability risks as landlords who rent out entire buildings. If a tenant or visitor is injured, the owner could be sued for negligence. For that reason, owner-occupants should ask their insurer if liability coverage can be added to their homeowners or renters policy.”

B: Renting out a separate section of a home

You and your tenant live in the same house but in separate areas. For example, the tenant lives in the basement that has been converted into a studio and never has to come upstairs to use the bathroom or kitchen. Since you live upstairs, it’s basically a separate part of the house.

While specific legal requirements may vary by jurisdiction, many insurance experts recommend landlord insurance for homeowners renting out part of their primary residence to tenants. The Insurance Information Institute advises homeowners who rent out part of their homes to consider obtaining landlord insurance.

III explains that homeowner’s insurance policies may not provide adequate coverage for rental situations, making landlord insurance a prudent choice for homeowners who become landlords.

10. How much does landlord insurance cost?

The cost difference between landlord insurance and homeowners insurance can vary based on several factors, including the location and size of the property, coverage limits, deductible amounts, and additional coverage options.

According to the Insurance Information Institute (III), landlord insurance cost approximately 25% more than homeowners insurance. Landlord insurance premiums are also influenced by factors such as the property’s location, age, condition, and the types and amounts of coverage selected.

How much is landlord insurance per month?

It depends where your property is situated. As of January 2024, landlord insurance can cost as low as $73.58 in Oregon to as much as $207.00 in Louisiana, with the national average pegged at $126/month.

11. Is landlord insurance tax deductible?

Yes, landlord insurance is tax deductible. The IRS specifically allows rental property owners to deduct insurance costs as rental expenses.

According to IRS Publication 527 (2020), Residential Rental Property, landlord insurance premiums are treated as rental expenses that can be deducted:

“You can deduct the cost of repairs to your rental property. You can also deduct the costs of supplies, utilities, fire and liability insurance, garbage collection, etc.”

Additionally, IRS Form 1040 Schedule E, Supplemental Income and Loss, provides a specific line item for deducting “Insurance” expenses for rental properties (Item No. 9).

So per the instructions in IRS Publication 527 and the inclusion of insurance as a deductible rental expense on Schedule E, landlords can claim deductions for rental property insurance premiums. The amount deductible would be the actual amount they paid for landlord’s insurance required for their rental property each tax year.

12. What are the best landlord insurance companies?

This is a loaded question, as some landlords prefer to work with a smaller insurance company while others prefer larger ones. So before you shop around, think about what you’re looking for.

Here is a list of the larger, more respected companies out there. It’s by no means exhaustive, but it gives you a head start:

  • Liberty Mutual Insurance stands out due to its customizable options, competitive rates, and extensive experience in the insurance industry. With a reputation for reliability and financial stability, Liberty Mutual is trusted by landlords nationwide to protect their investments and provide peace of mind.
  • Allstate offers flexible policies designed to meet the unique needs of landlords. Backed by years of experience and a solid reputation for reliability, Allstate stands out for its commitment to protecting landlords’ investments and providing support every step of the way.
  • StateFarm  is among the largest property insurers in the U.S. with over 90 years of experience specializing in rental properties. Their large size gives them strong financial backing and extensive risk modeling for competitive pricing.
  • As one of the largest global insurers, MetLife has over 150 years of industry experience and the financial strength to reliably service claims, offering customizable landlord insurance policies with liability coverage, property and loss-of-rents protections tailored for rental properties.
  • TrustedChoice is a top choice for landlord insurance, offering a vast network of independent agents who provide personalized guidance and access to multiple insurance carriers. With their emphasis on tailored coverage options, TrustedChoice ensures landlords find the best insurance solutions.
  • Farmers Insurance has over 80 years of experience specializing in property insurance products for homes and rental properties. With strong financial backing, dedicated agents familiar with the needs of rental property owners offer enhanced coverage options tailored to the unique needs of landlords.
  • USAA is a reliable choice for landlord insurance due to its exceptional customer service and comprehensive coverage options tailored specifically for military members and their families. With competitive rates and a strong commitment to serving its members, USAA offers peace of mind and support to landlords throughout their insurance journey.
  • Safeco Insurance stands out as one of the premier providers of landlord insurance. With a reputation for reliability, competitive rates, and exceptional customer service, Safeco ensures landlords have the protection and support they need to safeguard their investments with confidence.

tenant insurance

13. What factors should landlords watch out for in insurance policies?

It’s important to carefully read through your policy before signing up. You don’t want a claim to get denied just because you didn’t do your homework and realize something important wasn’t covered.

Here are a few things to take a close look at before signing the paperwork:

A. Dwelling Coverage with Guaranteed Replacement Cost

If you don’t get the “Guaranteed Replacement Cost,” the insurance company probably won’t pay to completely replace/rebuild a property if it is a total loss. Instead, it would cover the dwelling, like the structure, plumbing and gas systems, and internal fixtures.

B. Legal, Medical, and Liability Coverage

The thing to watch out for here is the coverage limits. Most policies can protect against these claims only to a certain point. Consider looking into an umbrella insurance policy to help protect your personal assets if your landlord insurance can’t cover all the costs.

C. Personal Property Protection

Whether you have furnished the property or not, this may be a good idea. This aspect of landlord insurance protects against damage to carpets, appliances, light fixtures, furniture, and curtains.

D. Acts of Nature or Water/Flood Coverage

Most new landlords need to realize a fundamental landlord policy doesn’t cover these events. However, these can get pricey depending on where you live, so many landlords avoid getting the extra coverage.

That is a HUGE risk, though, depending on where the unit is located. It’s relatively typical to hear stories of buildings destroyed by a hurricane or flood that wasn’t covered by insurance, leaving the owner with the entire bill.

E. Fair Rental Income Protection

This one is a coin flip. If your business can survive without a few months of rent in case something happens, it might make sense to forego this extra coverage. But if you need that regular cash flow, it might make sense to pay the additional premium for the peace of mind this coverage provides.

14. How much landlord insurance do I need?

You should get enough landlord insurance to fully cover rebuilding costs in the event of a total loss, plus coverage for lost rental income during any rebuilding period. Liability coverage of at least $500,000 is also recommended but according to Steadily, most landlords go for as much as $1M to protect against tenant lawsuits.

15. What landlord insurance do I need?

Whether you’re renting out single or multiple properties, you need a landlord insurance policy that provides coverage for property damage, loss of rents, liability protection, and possibly loss of business income.

Specifically, look for a policy that includes dwelling coverage to repair or rebuild your rental property, loss of rents coverage in case the property is uninhabitable for a period of time, liability coverage to protect against tenant injuries or lawsuits, and business income coverage for your rental income losses if the property can’t be rented.

16. When to get landlord insurance?

It is advisable to get landlord insurance as soon as one starts renting out an investment property–or even a section of a primary home–to tenants. Landlord insurance provides protection against potential risks and liabilities associated with rental properties, offering financial security and peace of mind from the outset of the lease.

17. Is landlord insurance more expensive than home insurance?

Landlord insurance tends to be slightly more expensive than homeowners insurance, usually costing about 15% to 25% more depending on the coverage. This difference in cost reflects the increased risks associated with renting out a property, including potential damage caused by tenants and liability concerns specific to rental properties.

18. Is landlord insurance worth it?

Getting landlord insurance is worth it for three key reasons:

  1. It protects your rental property investment by covering repairs in case of damage, allowing you to rebuild if there is a total loss
  2. It covers lost rental income if the property can’t be rented due to damage
  3. It provides liability protection that can save you from financial ruin in the event a tenant sues for injury or other covered circumstances

Ultimately, landlord insurance provides essential safeguards that allow you to run your rental business with greater confidence and security.

“Without an adequate landlord policy, rental owners take on an incredible and unwise level of financial exposure that could be disastrous if something goes wrong. Don’t take shortcuts here—proper coverage is an indispensable part of responsible property management.'”
Jack Miller, former president of the National Association of Insurance Commissioners

 

 

Authors

  • Karina Jugo

    Karina Jugo is a content administrator at RentPost who works directly with real estate and property management experts to create resources and guides for property managers. She has more than 15 years of experience in content research and writing for various industries.

  • Jacob Thomason

    Jacob Thomason is the CEO and co-founder of RentPost, software platform providing property managers, landlord or owners with the tools necessary for property management. Jacob is a software entrepreneur with with a vast array of expertise ranging from business concept design to software architecture and development. He is running RentPost for more than 14 years and helping property managers and property owners.

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