Do I Need Landlord’s Insurance?
Written by Cooper & Friedman PLLC on January 19, 2021
“Do I need landlord’s insurance?” This is a common question asked by many people who rent out apartments and homes. Landlord’s insurance is recommended for anyone renting out spaces or property. Whether you are leasing a room in your house or manage an apartment complex, there are many benefits to having landlord’s insurance.
Why? The reality is that you never really know what can go wrong. Even the most trusted tenant can accidentally start a fire or bring home a puppy that scratches up the floors. To protect against this, landlord’s insurance, much like homeowner’s insurance, ensures that your investment of time, money, and property is secure from many of life’s unknowns.
Common Areas of Coverage in Landlord’s Insurance
There are many types of landlord’s insurance and areas of coverage. Sorting through redundant protections is important when purchasing a policy. According to Investopedia, a good landlord insurance policy will always have three core protections–property damage, lost rental income/rental default insurance, and liability protection. Follow along to learn more about what these entail.
Property damage. Property damage coverage generally includes most types of physical damage to your property, which may include natural disasters, vandalism, destructive tenants, fires, etc. Just like homeowner’s insurance, it’s
recommended you get a policy with replacement cost rather than cash value coverage, especially if you have a lot of older furnishings. Also, the policy will not cover your tenant’s personal property most of the time. There are other types of insurance policies that cover renter property.
Lost rental income/rental default insurance. This coverage addresses situations of extreme property damage, such as a major natural disaster or animal infestation, that results in a need to vacate the space entirely. Lost rental income/rental default insurance will provide temporary rent reimbursement while the property is being repaired.
Liability Protection. This covers any injuries sustained by a tenant or guest on the property, such as a broken stairwell or slippery floor. Liability protection covers any legal or medical costs involved in the accident.
Further Coverage Types
Some additional forms of coverage cover specific instances that could arise. These include flood insurance, fire department service charges, debris removal, etc. So, being aware of the natural environment of your property is key to choosing additional policies. For example, if you live somewhere prone to forest fires, you may want to invest in complete fire-damage coverage.
Costs of Landlord’s Insurance
The cost of landlord’s insurance varies widely, from 10 to 25% more than homeowners insurance, according to Forbes. Costs are based on where you live, the type of property you own, the amount of coverage you need, your deductible, your mortgage, and other factors that vary by region. There are often some things you can do to cut costs–for example,
installing a security system may actually lower your payments.
Do I Need Landlord Insurance?
Landlord insurance is important for many landlords but there are contexts that may require other kinds of insurance. For example, if you are leasing out a room in your primary residence for a very short time, you may only need to get an add-on to your homeowners insurance policy. Also, if you are renting out a property for brief amounts of time, you may need a business insurance policy. Further, if you are renting through apps such as VRBO or Airbnb, you may want to consider home-sharing insurance. Landlord insurance isn’t right for everyone. Overall, being aware of your options is the key to choosing the best policy for you.
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