As a new landlord, you probably have several important questions about landlord insurance and its requirements. The following guide can help you navigate your options and understand important insurance terms and conditions that apply to most residential landlords, whether you are renting out an apartment, a home or a vacation property.
Homeowners Versus Landlord Policies
Many inexperienced landlords believe that their standard homeowners insurance policy will cover their rental property if an accident, a natural disaster or another destructive occurrence that is outside of their control should come about. Unfortunately, most homeowners policies cover only owner-occupied residences. What’s even more important to understand is that having only a homeowners policy on your rental property makes it likely that you will be left with the legal and financial obligation of any disaster that occurs, as renters are generally not held liable in such situations. Having a dedicated landlord policy helps prevent these issues from arising.
Cost of Landlord Insurance
While the typical homeowners insurance policy costs between $800 and $1,100 a year, it is common for a landlord policy to cost even more – between 15 and 20 percent more on average. This is because it is more likely for rental property to be damaged when tenants reside at it. Renting out your property for a longer period of time can help you save money, as short-term renters are considered to be higher-risk for a variety of reasons, with the chief one being carelessness. Since we are landlord insurance specialists we can find the most cost effective policy for your needs.
Core Protection Provisions
When choosing a landlord insurance policy, there are three protections that need to be included to have the most comprehensive coverage. They are as follows:
- Liability coverage – Liability provisions cover legal or medical costs that result after a visitor to your property or a tenant suffers an injury. This coverage typically only applies if a maintenance issue is present, such as building collapse or a slippery driveway that hasn’t been deiced.
- Property damage – This provision protects your finances if your building or furnishings are damaged due to a situation outside of your control, such as an earthquake, troublesome renters or a fire. It is better to avoid actual value or lump sum policies and opt for ones that use a replacement value or replacement cost calculation to cover the cost of damage. Replacement value-based policies tend to leave you in a less-than-stellar position, particularly if you have belongings that are older or less valuable.
- Rental default or lost rental income coverage – This temporary rental reimbursement insurance helps make up for the financial impact of lost income if your property becomes uninhabitable. Common causes include pest infestations, sinkholes or mold growth.
If you still are not sure of which policy to choose, remember that most landlord insurance policies are referred to as DP-1, DP-2 or DP-3 packages. DP means “dwelling property,” and the numbers refer to the levels of coverage within the policy. If you want the most generous coverage, opt for a DP-3 package. However, we can assist you in making the right decision.
While you want to make sure you have the three core provisions covered above all else, there are several endorsements that can strengthen your policy even further. Common riders that policyholders opt for include the following:
- Flood coverage – If your rental property is located in a zone that is prone to flooding, flood insurance can be extremely beneficial. It protects against municipal plumbing floods as well as natural ones.
- Emergency insurance – Renters can run into everyday emergencies that require your attention, such as an accidental lockout or a household plumbing issue. Emergency coverage can help you pay for costs related to fixing the problem, including travel.
- Guaranteed income insurance – Sometimes, renters do not pay their rent or can’t cover it for a month. Guaranteed income coverage helps you make up for the financial loss that can occur as a result.
Bundle options are often a great way to save money while also securing the fullest coverage possible. A renter’s insurance policy is something you should suggest to your tenants, as well. This coverage allows them to protect their own property in case of an accident.
Help for Landlords
Insurance by Castle can help you understand your landlord insurance policy options so you can make the best choice for your rental property. To learn more about our policies, call 800-644-6443 or get your quote on our website.