How Do You Calculate Insurance On A Rental Property?

If you’re looking into renting out one or more of the properties that you own, you’re most likely going to have a laundry list of items that you need to take care of before renting it out.

Checking the electricity, inspecting the bathrooms, patching walls, painting, and making sure everything in the rental space is ready to go for the new tenant is imperative before renting it out. 

You’ve also got to figure out the price you’re charging for rent. Do you include utilities, or will that be the responsibility of the tenant? There are other factors that go into determining the price of rent as well, including insurance on the property. 

When looking into quotes for insurance on your rental property, it’s a good idea to have a number in mind as to ensure you aren’t overpaying or getting underinsured. 

Whether renting out a home or apartment in a building, you can calculate and estimate the cost of insurance on a rental property to prepare yourself for all the costs of doing business as a landlord. 

What Is Included In Insurance On A Rental Property? 

Before we get into the cost of insurance on a rental property, you should know what is included. 

When looking to find out what is included in insurance on a rental property, you’ll find that it’s most often referred to as landlord insurance or apartment owner insurance. This is because this type of insurance covers the property and any assets YOU own compared to what the tenant owns, which is called renters insurance. 

Landlord insurance typically includes the following:

  • Coverage on the property or structural damage caused by fire, water damage, acts of nature (ask your insurance agent what this includes), and tenant abuse. 
  • Coverage for personal assets in the rental property used to furnish it, including appliances, electronics, furniture, artwork, etc. 
  • Liability coverage helps cover the costs of medical and legal expenses incurred if someone is injured on your property and you are deemed at fault. 
  • Loss of income payments to help you as you repair your property and are unable to rent it out. 

As you can see, it’s essential to have landlord insurance, even though it isn’t required by law to do so. Not having landlord insurance means you will pay out of pocket for any damages done to your property or assets, as well as pay for anything that happens to a person on your property that you are at fault for. 

This is why you don’t want to cut corners by skipping out on getting insurance. 

insurance on a rental property

Cost Of Insurance On A Rental Property

Now that you know what is covered under your landlord insurance policy, it’s time to estimate the cost of insurance! 

Unless you are a seasoned insurance agent, your numbers might never be “spot on,” but if you’re considering renting out your property, this will give you a good idea of what you will be paying. 

Simple Calculation

A quick but not always accurate estimate of the costs of insurance on a rental property is to take what you pay in homeowners insurance and add 25%. The increase covers the risks of not actually living in the home and not being able to address any situations that arise as well as including the liability coverage. 

Detailed Estimate

If you’re looking for a more exact number, there are several things you can do to help determine your landlord insurance cost

  • Establish the value of the property. Get your rental property appraised by an insurance company or independent appraiser. Knowing the value of the property will help you understand the costs.
  • Estimate a higher payment if you have a pool or fireplace. 
  • Know what additional items you’ll want to be included in your insurance coverage (earthquake, flood, collision damage, etc.). 
  • Estimate a higher payment if you live in an area where vandalism, theft, and neighborhood crime are high. 
  • Estimate a higher payment if you have a poor or less-than-average credit history. 
  • Choosing a lower deductible and lower monthly payment compared to the opposite. 

Talk To An Agent 

At the end of the day, the best way to determine the cost of insurance on a rental property is to discuss all of this with an experienced insurance agent.

They can answer all of your questions and discuss the list of things that are included in the policy, what you can (and should) include per your situation, your budget, and other factors that impact the cost. 

Again, you will most likely be paying more than you would for a homeowners policy but having and paying for landlord insurance far outweighs the risks of not having it. 

You can also factor some or all of the monthly payment into the price of the rental property to help offset the cost. 

Need A Quote For The Cost Of Insurance On A Rental Property? Contact Insurance By Castle Today! 

If you’re ready to rent out a property you own, contact our experienced and dedicated insurance agents to get a quote on landlord insurance. 

We are the leading insurance agency for landlords, and building owners in California and can help you get the coverage you need at a price that suits your budget today! 

To learn more about our agency and for helpful tips, read our blog page filled with articles like our most recent one, which discusses condo insurance vs. homeowners insurance.  Call us today to get a quote!

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