Published: March 2016
Every day in the United States, more than 500 people become landlords, according to the Rental Protection Agency. If you decide to rent out a home you own, you may be a candidate for landlord insurance.
This type of insurance typically includes two different types of coverage: property and liability protection. Both coverages are intended to help protect you, the landlord, from financial losses.
The property protection in a landlord insurance policy typically helps cover physical property related to the home you're renting out. This may include the dwelling itself and equipment you keep on site to help maintain it. Coverage generally includes:
- Dwelling: This coverage helps protect the rental home, condo or apartment itself due to damage by fire, lightning, wind, hail or other covered losses, explains the Insurance Information Institute (III).
- Other structures: This part of your policy helps protects you against damages resulting from a covered loss to your rental property's detached garage, storage shed or fence.
- Personal property used to service the rental: If you leave a lawnmower or snow blower onsite to maintain your rental property, landlord insurance may help cover this equipment if it's damaged or stolen, says the III. However, if you leave your personal bike or DVD player at your rental, it likely won't be covered under your landlord policy.
All of the above types of coverage are subject to deductibles and limits
, as determined by your specific landlord policy. Your deductible is the amount you'll pay for a covered loss before your landlord insurance kicks in. A limit is the maximum amount your policy will pay after a covered loss. Each coverage typically has its own, separate deductible and limit. You may be able to choose from different deductible and limit amounts for these coverages.
The liability portion of a landlord insurance policy may help you pay for another person's medical bills or your legal expenses if someone else is injured on your rental property and you're found responsible, says the III.
For example, if your tenant falls down stairs at your rental property and a court determines that you failed to maintain the stairs and/or railing, you could be held responsible for your tenant's medical, legal and other costs. In that case, your landlord liability coverage may help pay for those expenses, up to your policy's limits. You typically won't pay a deductible for a liability claim, says the III.
Depending on the neighborhood, geographic area or condition of your rental, you may want to consider adding on some optional coverages to your landlord policy. These protections may include:
- Vandalism and burglary. You may want extra protection to repair vandalism damage or replace items stolen from your rental (like appliances). Also, if someone vandalizes the property, those damages typically aren't covered by a traditional landlord policy unless you purchase an additional vandalism rider.
- Personal umbrella policy: If you want more liability protection than a landlord policy offers, you may want to consider this coverage. Umbrella policies are typically sold in $1 million increments, up to $5 million.
- Rental property under construction: Are you gutting/renovating your rental or building a new dwelling? You may be able to purchase additional coverage to help protect the structure until it's ready to be occupied.
- Building codes: If you're repairing or replacing part of your rental after it's been damaged, you could be legally required to upgrade items like wiring or ventilation, says the International Risk Management Institute (IRMI). This is because city or county codes may have changed since your property was originally built. This coverage may help reimburse you for those additional costs.
Talk with your local agent to learn what additional coverages may be available and for help understanding how they may help protect you.
While landlord insurance may help protect you from a number of sudden and accidental losses, you'll likely find that some things are excluded from the policy's coverage. They may include:
- Maintenance and equipment breakdowns. If the furnace or dishwasher in your rental property breaks down, you'll likely have to pay out of pocket for any necessary repairs or replacements.
- Property you share. If you live on the property and rent out a room or another floor to a tenant, you're typically not eligible for a landlord policy, according to the National Association of Insurance Commissioners (NAIC). Landlord policies are designed for "non-owner-occupied" property. Talk to your insurer about whether you can add on coverage to your homeowners policy for the section of your property you're renting.
- Tenants' belongings. Landlord insurance generally does not cover your tenant's personal possessions (electronics, clothes, etc.). For that protection, your tenants will need to purchase their own renter's insurance policy, says the Insurance Information Institute (III). Some landlords require tenants to show proof of renters insurance before approving their rental contract, according to the III. This helps renters protect their personal belongings, such as furniture and clothing, from covered losses such as fire or theft.
Ready to rent out a property you own to tenants? A local agent
can explain what options are available so you can choose the coverages that are right for you.