What Is A Landlord Insurance Policy, And How Does It Vary From Home Insurance?

Landlord insurance is a particular type of home insurance policy that protects homeowners from the financial loss they may incur on rental property. This policy protects against common fires, related hazards, theft, and malicious damage. A landlord's insurance will give you complete peace of mind because it will save you from all the risks you face when renting your property. A landlord's insurance will help you cover the loss of rental income if your rental units become uninhabitable due to minor or major accidents.

What are the coverage options for landlord insurance?

Property Damage: It protects against damage to building structures and personal property caused by fire, theft, storms, vandalism, or rental damage. Your landlord's insurance policy will cover the cost of replacing your entire property in case of total loss.

Protection against loss of income: If your rental property becomes uninhabitable due to insured losses such as storms or fire, landlord insurance can help you cover the loss of income. Rent repayment will prevent you from losing rental income.

Liability insurance: Liability coverage under landlord insurance can help you cover the costs, claims, and litigation associated with a third-party bodily injury that may occur on your property. If you, as a landlord, find yourself liable for another person's damages, liability insurance will cover you. For example, if you neglect to repair a rusty pipe and it destroys the tenant's valuable records, the tenant may file a liability claim against you. In such cases, a landlord's insurance will cover the costs.

Add-on coverages needed for landlord insurance

Depending on your rental neighbourhood, geographical area, or condition, you may add some optional coverage to your landlord's policy. These coverages may include:

Vandalism:  You may need optional coverage to help you pay for damages. If your property is destroyed, the traditional landlord's policy does not cover such damage unless you purchase destruction coverage.

Theft: A typical landlord's insurance policy will help repair your home in the event of damage but will not pay for stolen items. Optional coverage for the theft of things you keep in it may be available to help you care for household items or an object such as a lawn.

Rental properties under construction: Are you renting, renovating, or building a new residence? You can buy additional coverage to help protect the structure until the building is ready to be occupied.

Things that are not usually covered by landlord insurance

While landlord insurance may help cover the cost of sudden and accidental losses, you may find that certain items are excluded from the policy's coverage. A landlord's policy may not include:

Repairs and equipment breakdowns: If the furnace or dishwasher in your rental property breaks down, you will have to pay for necessary repairs or replacements.

Shared property:  If you live on the property and rent a room or another floor to a tenant, you are ‌not eligible for a landlord's policy in the opinion of the National Association of Insurance Commissioners. Landlord policies are designed for "owner-occupied" property. Talk to your insurer about whether the renting property category can add coverage to your homeownership policy.

Tenants' properties: landlord insurance rarely covers your tenant's personal property. Your tenants will need to purchase their tenant insurance policy for that coverage. Some landlords demand tenants establish proof of tenant insurance before approving their lease. This allows tenants to repair or replace their belongings, such as furniture and clothing, in damage caused by hazards such as fire or theft.

Factors that decide your landlord's premium rate

The cost of landlord insurance varies between properties and insurance providers. Factors influencing the price of your landlord's insurance include:

Crime Rate: Your premium will be higher if your investment property is in a high-risk area for burglary or other crimes.

Rent Price: Your landlord's insurance will usually cover rent loss. The higher the rent for your tenants, the higher your premium.

Natural Disaster Risk: The insurance cost may be higher if your rental property is ‌in a high-risk area for natural disasters like floods or wildfires. 

Replacement Costs: When arranging landlord insurance, you must know the actual price of replacement in case something happens. This includes replacing furniture, carpets, blinds, and other fixtures and the cost of remodelling. The insurer will consider all of this when determining your premium price.

Age and condition of the property: Your insurance premiums will be more expensive if the property is old or in bad shape.

Conclusion

Like a homeowner's insurance policy, landlord insurance covers the building itself in the event of damage from fire, light, wind, hail or other protective damage. If you live in a single-family home and rent a room to tenants, homeowner's insurance may offer insurance coverage depending on the number of people renting or staying in your home. Coverage varies depending on the insurer or policy, so consult with your agent before renting a room in your area. If you want to rent out your entire home to tenants, you need landlord's insurance.