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What is landlord insurance, and should I have it?

Landlord insurance provides coverage for property owners renting out one or more residential homes, apartments, or condos. As a landlord, you need protection from financial loss that may result from damages to a rental property due to fire, break-in, severe weather and more. You can get insurance to help cover the loss of income in the event that your rental units become uninhabitable due to circumstances beyond your control.

To get information, advice, and to find the right coverage to match your needs, contact an insurance agent. An agent can guide you in the right direction with free insurance quotes from several different insurance companies and help you find the landlord insurance plan that makes the most sense for you.

A landlord insurance policy pays the property manager/landlord for damage to the landlord’s property when a resident is found legally liable. Limited to damage to Landlord’s property arising from the perils of fire, smoke, explosion, backup or overflow of sewer, drain or sump, water damage, falling objects, riot or civil commotion. $100K limit; coverage is per occurrence with no aggregate limits. The policy is not personal liability insurance or renters insurance.

The Commercial Policy is provided by Great American Insurance Group, “A+” rated by AM Best & Standard & Poor’s; the agent/broker is Stern Risk Partners. The Property Manager is the named policyholder (can make claims directly) and enrolled units are automatically added to the policy as additionally insured.

What Does Landlord Insurance Cover?

Landlord insurance provides several important types of coverage. Depending on the insurance company you work with and the options you choose, your policy may consist of some or all of these types of insurance:

  • Property damage: This covers damage to your buildings and personal property due to fire, storm damage, theft, vandalism, and tenant damage. Ideally, your landlord insurance will cover the replacement costs for your entire rental property in the event of a total loss.
  • Liability insurance: This coverage protects you against liability claims and lawsuits. Whether a tenant, visitor or even a trespasser is injured on your rental property, you could find yourself in a legal mess. Your liability insurance will help you cover the costs associated with bodily injury claims on your property. These costs can include medical payments, funeral costs, legal fees, and judgment or settlement costs. You will also be covered if you, as the landlord, are found responsible for another person’s property damage. For example, if you neglect to fix a leaking water pipe and mold damage destroys a tenant’s expensive collection of vintage albums, a liability claim can be filed against you by the tenant.
  • Loss of income: This insurance will help compensate you for lost income in the event that a rental property becomes uninhabitable due to a covered loss, such as a storm or apartment fire. Your loss of income coverage, or “rental reimbursement,” will prevent you from losing the income you would have had if you were collecting rent.
  • Optional coverage: As a landlord, you can buy additional coverage, such as rent guarantee insurance, natural disaster insurance, employer liability insurance, and landlord contents insurance to cover your personal property items such as furnishings or carpet in the rental property. Contact an Insurance Agent for complete information on the types of coverage available.

How Does Landlord Insurance Work?

Landlord insurance protects you from damage to your property and from liability claims. Let’s look at a few examples of how landlord insurance works.

Rental property damage example: In the event that a lightning strike starts an apartment fire that causes substantial damage, your landlord insurance can help pay for the repairs or rebuilding.  Your property damage coverage has limits – be sure you are aware of what they are and remember that you will need to pay a deductible before you’ll get any reimbursement from your insurer. If you have loss of income coverage, you can be compensated for the rental income you will lose during repairs.

Note that landlord property damage insurance sometimes pays for tenant damage, and sometimes it will not. Taking a rental deposit at the time your tenant signs a lease is a good idea. You can also ask your agent if you can add coverage for tenant damage.

Landlord liability example: Let’s say a visitor comes to your apartment complex and is injured in a fall. If that visitor fell because he tripped over his own shoelaces, you shouldn’t have a liability claim on your hands. If the visitor is staying with one of your tenants and falls in the shower, you also will likely not be held responsible. That incident would potentially fall under the renter’s liability insurance.

However, if the visitor tripped due to negligence on your part, such as icy walkways around your building or broken steps on a stairway, you may have a liability claim on your hands. In this case, the visitor could file a claim against your insurance policy to cover the costs of medical care. If the injury is severe or the negligence considered egregious, the visitor may file a lawsuit against you. Your landlord insurance can cover your costs up to the limits on your policy after your deductible amount is paid.

Do I Have to Have Landlord Insurance?

Landlord insurance is not required by law, but you would be wise to carry it if you’re collecting rent and managing a property.  Building fires, tropical storms, tornadoes, vandalism, and liability claims are some of the key things you want to be prepared for as a landlord. If your property experiences $100,000 worth of damage and you do not have insurance to cover it, those costs must come out of your pocket.

You need landlord insurance when you do not occupy the same residence as your tenant. You will also need landlord insurance if you are renting out your own home temporarily or sharing accommodations, such as your basement level, with a renter.

Some landlords rely on their homeowners’ insurance to cover their rental units. It is important to know that your homeowners’ policy most likely will not cover damage to your rental property unless you are only renting out a portion of the home you are living in. It will also likely not provide coverage for liability claims.

Why Is Landlord Insurance Important?

Landlord insurance is important because it protects you from financial loss resulting from accidents, natural disasters, injuries and other liability issues associated with your rental property. It also provides reimbursement for loss of rental income and can cover any repairs or even the entire replacement of a rental property structure.

How Much Is Landlord Insurance?

The cost of landlord insurance can vary considerably based on a number of factors. You may see rates as low as $500 per year for a small rental unit, or several thousands of dollars per year for a larger unit with a swimming pool. If you rent out a house that you eventually plan to sell, you may pay about 25% more for your landlord insurance than you were paying for homeowners insurance.

Some of the factors that will affect your premium costs include:

  • Your geographic location and any known risks in the area
  • The size of the structure
  • How many rental units you have
  • The age and condition of the building
  • Whether your electrical wiring is up to current code
  • Whether you allow smokers to rent from you
  • Whether your complex has a swimming pool
  • The type and amount of coverage you are purchasing
  • Whether you have fire sprinklers installed in your rental units
  • Whether the complex has gated access
  • Whether you have burglar alarms

Your best bet for the landlord insurance policy you need is work with an Insurance Agent you trust.  An Agent can compare prices for you, explain the insurance coverage options available, and look for landlord insurance discounts you may qualify for to make your coverage affordable.

Is Landlord Insurance Tax Deductible?

Yes, you can deduct landlord insurance premiums you pay on your rental property, including any landlord insurance policies on the building, contents, and liability. Because being a landlord is a business endeavor, your landlord insurance can be considered a business expense.

Can Landlords Require Renters Insurance?

Although there is no federal or state law requiring tenants to have renters insurance, as a landlord it is fully within your legal rights to require this as part of the rental agreement. Stipulated in a rental agreement, this requirement must apply to every tenant. A landlord can also require that a tenant have a specific amount of insurance, provide proof of coverage and require that the tenant maintain the policy for the duration of a lease.

Where Can I Get Landlord Insurance?

The best way to purchase landlord insurance is through an Insurance Agent.  Agents can compare quotes and options from for you and customize your coverage to meet your needs.

Landlord insurance is vital if you own a rental property. It protects you from expensive damage to your property due to accidents and natural disasters, and loss of rental income.

Contact an Insurance Agent right now so you can get personalized assistance to find the coverage you need.

What are the benefits to landlord insurance?

  1. Eliminate the Headache and Expense of Resident Caused Damage
    Accidents and damage happen – it’s a fact when managing rental properties. When these accidents happen, if your renter doesn’t carry insurance it can be expensive and a hassle for everyone. To avoid these costly situations it is becoming increasingly common for property managers to require residents to carry insurance.With other solutions that aren’t built right into your property management software, it can be very challenging to accurately track resident insurance. At the end of the day, this can leave your properties vulnerable and exposed. With Liability To Landlord Insurance, AppFolio customers can now instantly enroll units in basic Liability To Landlord Insurance and offer owners and investors increased protection against resident-caused damage.
  2. It Is Vital To Protect Investments From Damage Due To Resident Negligence
    According to a recent study*, more than two-thirds of apartment hunters don’t carry insurance. This means that in the event of accidental damage caused by residents the owners and investors may be exposed. Requiring Liability To Landlord Insurance is an easy way to reduce this risk and proactively protect your properties. The largest property management companies are embracing this trend quickly because it increases profitability and NOI.
  3. The Great American Advantage
    Designed specifically for Property Managers, the Liability To Landlord Insurance policy is provided by Great American Insurance Group, a national insurance company known for quality insurance products and financial strength. Great American is currently rated “A+” (Superior) by AM Best** and “A+” (Strong) by Standard & Poor’s.
  4. Built Into Management’s Software: Simple And Instant Deployment
    Rather than spending time and resources working in multiple systems attempting to police the lease requirements, all of the important information is right there in the software you use every day. And when everything is stored and tracked in the management software, it’s so easy to deploy and track.
  5. Instant Coverage
    Once your lease mandates insurance, add this service to your lease renewals, turn it on and enroll the unit in liability insurance with the click of a button. Tracking and built-in reports make it simple to mandate insurance and be sure you have full compliance whether or not your resident has a renters’ insurance policy.
  6. Residents Benefit Too
    If you choose to mandate proof of renters’ insurance for your properties, Liability To Landlord Insurance will provide your residents with a low-cost option to meet their lease requirement. Renters who want coverage of their own possessions can always choose to purchase their own renters’ insurance and provide proof of coverage which is easily tracked in AppFolio Property Manager.
  7. Cost-Effective Pricing
    The pricing model is simple and affordable. There are $0 implementation fees and the price is $9.50 per enrolled unit, per month.

Be sure to communicate with your insurance agent that the property is a non-owner occupied rental property. There are additional riders and coverages that do not cost much that provide you with added coverage. The most important is the ability to recover lost rents. A common example is a severe water loss or fire, which requires the tenants to vacate in order to make the necessary repairs. With the proper coverage, your insurance company will cover the damages plus the lost rents, as well as the tenant’s temporary housing costs.  Not to mention in most cases the insurance policy will be a reduced rate from the standard homeowner insurance policy.

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