Need Landlord Insurance? Here’s Everything You Need to Know

1375 views September 1, 2017 September 25, 2017 Justin Stowe 2

Purchasing the right landlord insurance policy is one of the most important things you can do to protect your business. Even though it’s not a fun topic, a little time spent learning about it and your policy will be well worth it.

What Does Landlord Insurance Cover?

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

Property Damage

This coverage refers to damage of 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.

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.

Liability Insurance

If a liability claim or lawsuit is brought against you, this is the portion of landlord insurance that 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 may still be held liable!

Liability insurance covers a number of things: medical costs, funeral costs, legal fees and settlement fees. Keep in mind lawsuits against you may come from the tenant’s property being damaged as well, not just injuries.

Optional Coverage

You may want to invest in additional coverage depending on your risk profile. A few 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.

Is Landlord Insurance Required by Law?

“The man who became of his understanding of the laws of wealth, acquireth a growing surplus, should give thought to those future days. He should plan certain investments or provisions that may endure safely for many years, yet will be available when the time arrives which he has so wisely anticipated.”

― George S. Clason, The Richest Man in Babylon

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, liability – these are all things that landlords have to face.

Something else to keep in mind is that even if you are just renting out your home temporarily or maybe your basement, you should get landlord insurance. Regular home insurance doesn’t cut it, because you wouldn’t be living in the same residence as the tenant.

Homeowners vs Landlord Insurance

Homeowners insurance pertains to a property that the owner is living in. This distinction leads to three types of situations to consider if you’re renting out at least part of your home:

Scenario 1

You live in the same general area as the tenant. So maybe it’s a 3 bedroom house, with all bedrooms upstairs next to each other. In this case, regular homeowners insurance is fine.

Scenario 2

You and your tenant both live in the same house, but in separate areas. For example, maybe the tenant lives in the basement that has been converted into a small apartment and never has to come upstairs to use a kitchen, bathroom, etc. Since you live upstairs, it’s basically a separate part of the house. In this case, you should at least look into landlord insurance, since you don’t live in the same area as your tenant. Your homeowners insurance may cover you, but you should double-check.

Scenario 3

You have completely moved out of your old house, and now a tenant lives there. In this case, landlord insurance is definitely what you’d need.

How Much Does Landlord Insurance Cost?

As you might expect, your rate will depend on a number of things. A small unit may be pretty low, about $500 a year. A large unit with a swimming pool, or a building with multiple units, may be thousands of dollars a year.

Here are just a few factors that come into play when the insurance company gives you a quote:

  • The number of units
  • Geographic location
  • Whether the complex is gated
  • The amount of coverage you’re signing up for, as well as the type
  • If smokers are allowed
  • Condition and age of the building
  • If burglar/smoke alarms are in place
  • Plumbing and electrical is up to code

Is Landlord Insurance Tax Deductible?

“The hardest thing to understand in the world is the income tax.” -Albert Einstein

Most costs you incur as a landlord will be considered business expenses. That means landlord insurance premiums can be deducted from your taxes.

What are the Best Landlord Insurance Companies?

This is a loaded question, as some landlords may prefer to work with a smaller insurance company while others may prefer larger ones. 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 gives you a head start:

Landlord Insurance Items to Watch Out For

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

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 just cover the dwelling itself like the structure, plumbing and gas systems, and internal fixtures.

Legal, Medical and Liability Coverage – The thing to watch out for here is the coverage limits. Most policies can protect against these claims, but only to a certain point. You may want to look into an umbrella insurance policy to help protect your personal assets in case your landlord insurance can’t cover all of the costs.

That said, if your property is held under an LLC:

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.

Acts of Nature or Water/Flood Coverage

Most new landlords don’t realize these events aren’t covered by a basic landlord policy. These can get pricey depending on where you live, so many landlords choose not to get the extra coverage.

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

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 extra premium for the peace of mind this coverage provides.


“You have to make sure that your assets and your back is protected before you make any big decisions.” -Adam Rich

The fact that you found this article on landlord insurance probably means you’ve decided to go ahead and purchase it. That’s a great decision, because it’s one of the best things you can do to protect your investment. Just make sure you shop around and compare several different companies/policies. This process will help you learn more about the coverage policy options as a whole and get better rates.

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