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Insurance requirements for landlords

Fact-checked with HomeInsurance.com

If you own a rental property, you might assume that homeowners insurance will cover the structure of the building and certain liabilities. But for landlords, there’s a special type of policy called landlord insurance that offers special protections. 

Landlords and homeowners are treated differently when it comes to insurance. So whether you rent a property to college students or Airbnb guests, having a landlord insurance policy can come in handy.

What is landlord insurance?

Landlord insurance is a type of property insurance that is specifically available to landlords. It covers the physical structure of the building, the landlord’s personal liability, and loss of income. It’s similar to homeowners insurance, but has a few key differences, which we’ll get into later.

Contrary to popular belief, landlord insurance does not cover tenants’ belongings. Damage to individual apartment units is covered, and so are tenant injuries. For example, if a tenant slipped and fell on an icy walkway, and the landlord was found to be at-fault, landlord insurance would cover the cost of the tenant’s medical bills.

Why you need landlord insurance

The main purpose of landlord insurance is to protect the property owner from liability claims, and to help them recoup income if the building becomes uninhabitable. Renting a property is considered to be a business, and with landlord insurance, your personal assets are protected in the event of a loss.

Landlord insurance is not required by law. But if you have a mortgage on the property you are renting out, your lending company might require you to have a certain amount of coverage. Your tenants may also request to see proof of landlord insurance before signing a lease for their own peace of mind. If you don’t have coverage, it could potentially jeopardize your ability to rent the units.

What does landlord insurance cover?

Landlord insurance includes three main coverages, which include:

  • Property damage: Property damage insurance covers the physical structure of the building, including individual apartments and common areas. It also covers personal property that you allow tenants to use, like appliances and furniture.
  • Liability: Liability insurance covers your legal fees if a tenant gets injured on the property, and you get sued for negligence. If you have to go to court, your insurance will cover the cost of your settlement.
  • Loss of income: If the building is damaged in a covered peril, and it becomes uninhabitable, loss of income coverage will reimburse you for lost income. This does not apply for voluntary renovations or improvements.

Some landlords may also choose to purchase additional coverage, called endorsements, to fill certain gaps in their insurance. Common endorsements for landlord insurance include the following:

Flood insurance

Flood damage is never covered by landlord insurance. If your building is located in an area with a high risk of floods, consider purchasing a flood insurance policy. It will help cover the cost of building repairs after a major flood. 

Earthquake insurance

Similar to flood damage, earthquake damage is also not covered by landlord insurance. Property owners should consider buying earthquake insurance if they own a building in a high-risk earthquake state, like California or Alaska. 

Building code insurance

If you ever have to rebuild your property or make repairs, you may be required to comply with updated building codes, and having building code insurance can be a lifesaver. Without it, you would have to pay out-of-pocket to make the changes, even though local regulation changes are out of your control.

Non-occupied dwelling coverage

In some cases, your insurance company may not cover a claim if the building has been unoccupied for more than 30 days. For example, if your rental home was broken into after sitting vacant for a month, you might have trouble getting the claim approved. With non-occupied dwelling coverage, you can get extended protection for that time.

How much does landlord insurance cost?

According to the Insurance Information Institute (III), landlord insurance costs about 25% more than homeowners insurance. That’s because landlord insurance comes with extra protection and coverage that home insurance doesn’t include. For perspective, the average cost of home insurance in the United States is $1,211 per year, according to the latest data from the III. That means landlord insurance could cost you just over $1,500.

Renters insurance, on the other hand, is typically very inexpensive. The III estimates that the average cost of renters insurance is just $180 per year. However, renters insurance only covers tenants’ personal belongings and liability. There’s no coverage for the physical structure of the building, because the tenant is not the property owner.

Like all types of insurance, the cost of landlord insurance depends on a number of different factors. The location of the property, the size of the building, the number of units and the age of the building are all factored into your rate. There are also some personal factors, like your history of claims and your credit score, that contribute to your rate. 

What’s the difference between homeowners insurance and landlords insurance?

Homeowners insurance and landlord insurance share some similarities. They both include coverage for the structure of the building, personal property, and liability coverage. But there are a few key differences that are important to know.

First, homeowners insurance only applies to owner-occupied homes. It doesn’t cover buildings that are rented out to tenants. Because landlords face more risk than homeowners, landlord insurance includes higher liability coverage limits than home insurance does.

The other major difference is that landlord insurance includes loss of income coverage. Landlords operate a business, and they rely on their rental property for income. If the building is damaged by a covered claim, the insurance company will reimburse the owner for lost income. Homeowners, on the other hand, don’t make any money from owning their home.

The takeaway

  • Homeowners and renters insurance do not cover rental properties that you own.
  • Landlord insurance isn’t required by law, but it might be required by your mortgage lender.
  • Having landlord insurance provides valuable liability coverage and loss of income for property owners after a major claim.

Owning a rental property is a great way to make extra money. But a homeowners or renters insurance policy doesn’t offer the protection you need as a landlord. 

If you have a rental property, you need landlord insurance to protect your personal assets in the event of a loss. You can also purchase endorsements, like flood insurance or building code insurance, to extend your coverage even further. 

Elizabeth Rivelli

Elizabeth is an insurance writer for coverage.com, where she covers insurance providers and reviews policies to help consumers find comprehensive and affordable coverage for every area of their life. She has more than three years of writing experience for top online insurance and finance publications.

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