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Landlord Insurance: All Questions You Ever Had Are Finally Answered

The life on planet Earth is risky in its own right, but the level of risk doubles when you decide to become a landlord. If you think that your tenants will be special – tidy, cautious, and willing to sacrifice their lives in the name of the safety of your belongings, you’re just fooling yourself. Windows get broken, wine spills on carpet, children paint monsters on beige walls. And there’s almost nothing you can do about it. I said ‘almost’ because there’s a great way to protect you from all threats related to renting out.

When it comes to property management, realists tend to do better than optimists – and for a good reason. It’s better to be safe than sorry, that’s why making every effort to ensure the safety of your property is a smart approach to follow. In this blog, you’ll find the answers to all questions about landlord insurance you might have.

What Is Landlord Insurance?

Landlord insurance is a special coverage for those renting out one or more of their properties. It’s an insurance policy meant to protect a property owner from financial losses associated with renting out.

“If someone is going to rent out all or part of a home, they need a landlord’s policy.  A landlord’s policy provides more coverage and specifically includes damage to the property and injuries to others caused by a tenant.”

Thomas Simeone, Personal Injury Attorney

Why Do I Need One?

First and foremost, it excuses you from going through the third party insurance company your renters use. Obviously, it saves you time and healthy nerves. What’s more, it protects you in a financial way. Typically, a landlord insurance includes useful features like accidental damage cover, building insurance, and protection from a loss of rent. Last but not least, landlord insurance is the only one that covers liabilities associated with tenant’s visitors.

What’s The Difference Between Landlord Insurance and Homeowner Insurance?

There’s a difference between these two types of insurances. While landlord insurance typically covers all items used in a rental property, homeowners insurance only protects all personal items of a landlord that are located in a rental property. That’s why you’d better upgrade your insurance policy in case you’re planning to rent out.

“Many landlords believe that the same homeowner policy they maintained when they lived in the home will cover them after they convert the home to a rental. However, that’s not correct, because most homeowner policies don’t cover landlord activities unless specifically added to the policy. So landlords should always check with their insurance carrier to confirm their use is covered.”

Flavia Berys, Real Estate Attorney

Is It Buy-To-Let Insurance We’re Talking About?

Not really. Although the terms ‘landlord insurance’ and ‘buy-to-let insurance’ are often interchangeable, there’s a significant difference between the two. While the first one is a multi-property insurance covering all properties you’re renting out, the letter is associated with only one property that’s been purchased together with a buy-to-let mortgage.

Where Can I Get One and How Much Does It Cost?

Most of the insurance companies offer landlord insurance as a part of their service. And the good news that it won’t cost you a fortune. Although the price may slightly vary, it usually costs only 10-20 percent more than a standard homeowner insurance. Thus, be geared towards paying $980 per year for a premium landlord coverage.

“I insured my private home for years and was surprised that, when I decided to lease out the property, I had to update my policy. My insurer asked more questions about security and safety than he had when the policy covered my property as my primary residence.  My policy price did not rise significantly – maybe $35 more a year.  However, the change paid off when a tenant caused damages to a window that required extensive repair. The policy covered the cost”.

Elizabeth Gibson, Chief Content Officer at EZ Landlord Forms LLC

Is Landlord Insurance Obligatory?

Although landlord insurance is not required by law, you’re strongly advised to get one. Especially, if you’re owing more than one rental property. Not only will that make you sleep tighter (delinquent tenants are known as a common cause of landlords’ insomnia), but you’ll also protect yourself from financial loss.

Landlord insurance price

Is Landlords Insurance Worth My Money?

Absolutely. Renting out is always a risk, and it’s immensely true that an ounce of prevention is worth a pound of cure. Given all the benefits landlord insurance may potentially provide, its price seems to be ridiculously low.

What Does It Cover?

Although it depends greatly on what insurance company you work with and what exactly you’d like to get covered, be geared towards the following options:

  • Property damage – your building and property will be protected from damage caused by fire, storm, theft, vandalism, and tenants.
  • Loss of income – you’ll be paid even if your rental property becomes uninhabitable due to a fire or severe storm. This type of coverage is commonly referred to as ‘rental reimbursement’ because it protects you from losing the income you’d have had if you were still collecting rent.
  • Liability insurance – you’ll get covered all expenses associated with injury claims made on your property. What’s more, this insurance will work for you in case you are found responsible for damage to your renters’ property (for instance, your failure to deal with mold destroys an expensive item of your tenant).
  • Optional coverage – this one may include natural disaster insurance, rent guarantee insurance, employer liability insurance or landlord contents insurance. This way, you’ll have your personal property like expensive furnishing or carpets protected.

“Landlord insurance generally provides property and liability protection. The property portion will cover the rental dwelling, as well as personal items used to maintain the property, such as a lawnmower or leaf blower. The liability protection can help pay for a tenant’s medical bills if you are at fault, like if the renter was hurt for your failure to maintain the property. You can add additional coverage, though. Vandalism coverage, for instance, would be used in case your property is damaged by a renter, or anyone, for that matter. Adding burglary coverage also will protect you if your tenant, for example, steals a built-in appliance when moving out.”

Jason Hargraves, Managing Editor at InsuranceQuotes.com

Is Landlord Insurance Tax Deductible?

Yes. Since being a landlord is usually considered a business endeavor, landlords insurance is seen as another type of business expense. That’s why you can deduct premiums you pay for your rental property insurance. As experts confirm, landlords can deduct taxes for plenty of rental activities, including fire, theft, flood insurance, and etc.

Why Renter Insurance Is Still Necessary If You Have a Landlord One?

As our guest expert Travis Biggers explains, renter insurance provides a significant layer of protection when a tenant is found at fault in a loss. Let’s assume that a tenant starts a fire because of smoking on a balcony. Let’s say the fire causes you $200,000 in damage. If your tenant doesn’t have a renter insurance, your landlord’s coverage will pay the entire sum in the loss and will attempt to subrogate against your tenant. However, if your tenant does have a renter insurance, $100,000 will be covered by his liability coverage and your landlord’s liability will be reduced by half. That’s why we strongly suggest educating your tenants on the importance of renter insurance.

“Renters insurance is a great thing for both the renter and the landlord. For often less than $25 per month the tenant obtains coverage of all their belongings in the event of theft or disaster.  For the landlord, they may receive insurance discounts if their tenants are forced to purchase renters insurance, and the potential liability of the tenant’s belongings are no longer a concern.”

Nathan Miller, founder of Rentec Direct

Can Landlords Require Renters Insurance?

As we found out, it all depends on what state we’re talking about. Some states forbid landlords from requiring tenant insurance (Oklahoma), some require it (Utah), while others allow it to be required only when it comes to families with a higher income (Oregon). Given this, you’d better check your local law before asking your renters to buy their own insurance.

“Regarding renters insurance, there are situations where it is not advisable to require it. Depending on the neighborhood and the renters, it may be difficult to find tenants that want to add the extra expense of rental insurance to their monthly budgets. However, most landlord insurance policies will cover damages that are a direct result of the renter’s activity. This allows for the landlord to feel secure and not risk losing tenants due to an extra fee each month”.

Elizabeth Jenkins, Communication Manager at Source Capital Funding

So What’s The Bottom Line?

Given all said above, it becomes clear that landlord insurance is a chance to safeguard your financial future. Once you’re a landlord, you have to be ready for all sort of issues including those that may cost you money, time, and effort. Buying a landlord insurance will sure bring quality to your property management experience. And, as Elizabeth Jenkins said, landlord insurance is so useful and cheap you’d be crazy not to have it.


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