May 28, 2019
The What and Why of Landlord Insurance
If you’re just bought a rental property, you may be wondering if you need any special insurance. You do. People who rent out their property need a special type of insurance called “landlord insurance.” Landlord insurance gives you the protection you need by covering the risk of owning a property and renting it out. Let’s break it down.
What Is Landlord Insurance?
Quite simply, landlord insurance offers coverage for property owners who rent out their home, condo or apartment. Whether you have one property rental or 10 or more, you need to safeguard yourself from financial and legal risks.
Why Can’t I Just Use Home Insurance?
If you are living in your property and only renting out a room, you may be able to stick with your home insurance policy. (Be sure to call your insurance company to confirm this.) However, if you have a property for the sole purpose of renting it, a standard home insurance policy doesn’t cover it. For example, typically, homeowners’ insurance policies have a limit on personal liability coverage, usually to around a few hundred thousand dollars. However, if you are involved in a situation where a tenant has been injured due to negligence on your part, the lawsuit could run up to half a million or more. You will need landlord insurance.
What’s Included in Landlord Insurance?
It can vary, depending on the company and the options you choose, however, these are common options:
Property Insurance: Landlord insurance policies cover your building from loss stemming from fire, theft, storms, and vandalism. Also, if you have other structures on your land, don’t assume those will be covered. You may have to add a rider. Be sure to read the fine print.
Liability Insurance: This part of landlord insurance covers legal costs or medical bills that you are liable for. This protects against negligence claims, say in the case of a tenant who slips and falls on some icy outdoor stairs that you failed to maintain. These legal costs can include medical or funeral costs, legal bills and settlement/judgement costs.
Loss of Rental Income Insurance: If your rental becomes inhabitable after a fire or flood, forcing your tenant to move out, loss of income insurance is invaluable. It will compensate you for the lost rental income so you can continue to pay the mortgage while getting repairs done.
What’s Guaranteed Replacement Cost?
When shopping around for landlord insurance, it may be worth it to pay a little extra to ensure that you have guaranteed replacement costs in the event of a fire or other catastrophe. This type of replacement cost enables you to repair or rebuild even if the cost of building exceeds the original coverage amount.
Is my Tenant Covered?
No. Landlord insurance protects you – the landlord – not the tenant. It’s intended to cover the home for fire, lightning, vandalism, and other perils. It offers coverage on the building, and in some cases, some fixtures (fridge, stove, etc.) and possibly the furnishings if you are renting your property as a fully furnished rental. It does not cover any of the tenant’s personal belongings. Landlords should encourage all of their tenants to have tenant insurance.
How Property Vista Helps
Our suite of property management tools is specifically designed to improve all areas of operations, from marketing to maintenance to the leasing cycle. Property Vista also helps minimize risk with a built-in tenant insurance program. If you’re looking for property management software, check out our pricing and arrange for a demo.