What Is Landlord Insurance and Why Do You Need It?

If you are a landlord, it’s important to take steps to properly protect yourself and your property before the renters move in. Landlord insurance helps fill in the gaps of coverage where homeowners insurance policies don’t apply and allows you to rest easy knowing your home is sufficiently covered while tenants occupy your property.

What is Landlord Insurance?

While homeowners insurance provides coverage for a home occupied by its owner(s), landlord insurance covers properties that are rented to short-term guests or long-term renters. If you plan on renting out a room while you stay in the home, your homeowners insurance policy may offer coverage, but it depends on factors like the number of renters and the length of their rental agreement(s), so check your policy first.

A typical landlord insurance policy will cover the following:

Property Damage

Property damage insurance ensures your home is protected against damage caused by natural disasters, fire, electrical mishaps, and more while your home is being rented. This typically covers the home itself, any detached structures on the rental property such as ADUs or garages, and any personal property you use to maintain the home.

Liability

If a renter or visitor suffers an injury on your property, your landlord insurance will help cover their medical costs and, if legal action is taken, legal costs. Liability costs can snowball quickly, and it’s important to have coverage in place to protect yourself from having to pay out a lump sum for hospital bills or a settlement. For example, if a renter steps through a floorboard while walking on the deck and hurts their leg, a court may decide that a lack of property maintenance was the cause of the injury, thus leaving you responsible. However unlikely the scenario may seem, having coverage in place is better than the alternative.

Rental Income Loss

Homes are prone to accidents and issues that can render them uninhabitable. If this happens at your rental, you won’t see rental income until the problem has been fixed. Most policies provide reimbursement for lost income during a time when you’re unable to rent out the property, as long the cause of the underlying issue is covered. For example—if you live in a climate that’s conducive to mold growth, a rapid spread of mold could put a halt on renting your property. Accordingly, you’d want to make sure your policy provides adequate coverage against damage caused by mold.

Why Do You Need Landlord Insurance?

In short, renting out your property and having landlord insurance go hand-in-hand. Because homeowners insurance is unlikely to provide sufficient coverage for your rental, you’ll need a separate policy that covers you specifically as a landlord. When shopping around for landlord insurance, make comparisons based on the needs of your rental property. For instance, if you have separate dwellings on the property, prioritize additional structures coverage when looking at different policies. If you’re looking to bundle your landlord insurance with your existing coverage, keep an eye out for bundling discounts.

For more information on managing your rental, read our article on how to Give Your Rental A Competitive Advantage.

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