Have you just purchased a property to rent out to a tenant? Are you looking for the most suitable insurance policy to protect your investment against potential accidents or perils?
If it is so, you’ve landed on just the right page. This post elaborates on landlord insurance, its coverage, and its benefits to give you an idea about why you should get it. Read on if you want to avoid sudden heavy expenses in case such unexpected inconveniences occur.
This guide includes:
What Is Landlord Insurance?
Landlord insurance is a type of policy that protects the property against the potential damages that can emerge as a result of perils or accidents. It covers the financial losses of the landlord.
Landlord insurance plans are not suitable for the properties of primary residence but are rather applicable for the rentals of the property owner.
Landlord Insurance in a Nutshell:
- Covers the dwelling occupied not by the property owner but by a tenant (as opposed to the homeowners insurance policy)
- Basic coverage includes rental income loss due to covered incidents, liability protection, and property damage by certain perils or accidents
- There are add-ons regarding protection against flood damage, rental loss due to fault of the tenant, and maintenance expenses
What Does Landlord Insurance Cover?
Landlord insurance coverage is quite comprehensive in terms of meeting the financial interests of a property owner who’s renting out. The coverage of a typical policy includes the following:
1. Property Damage
Landlord insurance covers the expenses to rebuild or repair your property after being damaged in a fire, severe weather, riots, an act of vandalism, or by lightning. In addition to the primary property structure, landlord insurance also covers detached buildings on the property.
2. Personal Property Coverage
Landlord insurance covers the personal properties inside the property, if it’s furnished by the landlord, meaning that your furniture is protected against damage due to burglary, fire, burst pipes, and other perils.
3. Liability Coverage
Liability coverage is part of the landlord policy that protects you against potential lawsuits the lessee may file against you. Protection against liability claims covers you when your tenant or a guest was injured due to some accident deriving from your legal responsibilities regarding the property. The liability coverage relieves you from the burden of legal fees and medical expenses in such cases.
4. Loss of Rent
If your property becomes uninhabitable for a period of time due to a covered peril or accident, and your rental income seizes accordingly, landlord insurance covers your rental loss until the property is repaired or rebuilt.
- Flood Insurance: Natural disasters are typically excluded from landlord insurance policies. You can get it included in your policy for an additional fee.
- Costs of Additional Construction: This additional part of the policy covers your expenses due to fixing the property according to regulations upon getting damaged.
- Emergency Coverage: Emergency coverage comes in handy when your tenant requests that you urgently fix something in the property.
- Guaranteed Income Insurance: This add-on covers your financial loss if the tenant fails to pay your monthly rent.
- Equipment Breakdown Coverage: This extra coverage you can purchase as an add-on pays for the repairs of the electronics and appliances that are owned by the landlord.
What Is Excluded From the Landlord Insurance Coverage?
Although the landlord insurance coverage is considerably comprehensive, there are certain things that are not included in the policy. These items are as follows:
1. Personal Property of the Tenant
Landlord insurance policies don’t cover the personal property of the tenant. To have their personal possessions covered, the tenant is required to obtain a separate renters insurance policy.
2. Equipment Breakdowns and Maintenance Costs
Unless you have the additional Equipment Breakdown Coverage, you’ll have to dip in your own pocket in case the dishwasher or the AC inside the property breaks down. If you purchase EBC, on the other hand, you’re covered for such maintenance issues.
3. Earthquakes and Floods
Both landlord insurance and homeowners insurance policies typically don’t cover earthquakes, floods, and water backup automatically. You need to purchase additional coverage if you want your property to be protected against such natural disasters.
Differences Between Landlord Insurance and Homeowners Insurance Policies
Landlord insurance protects the rental property of a landlord and their related financial interests, whereas homeowners insurance protects the primary residence of the property owner.
Landlord insurance covers rent loss due to the uninhabitable condition of the property following a covered incident. Homeowners insurance, on the other hand, covers the accommodation needs of the resident during the period when the property is uninhabitable.
Personal properties are excluded from the landlord insurance coverage whereas the interior content of the property is also usually included in the homeowners insurance policy coverage.
Do I Need Landlord Insurance?
Purchasing a landlord insurance policy isn’t legally obligatory. However, it’s safe to say that it’s practically necessary because it’ll financially cover you in case the certain requirements of your tenancy contract oblige you to make unexpected payments in stinging amounts.
If you’re getting a mortgage to purchase the property in question, on the other hand, your lender may demand that you obtain landlord insurance.
Benefits of Landlord Insurance
Being a landlord means being exposed to various risks regarding your rental properties. Landlord insurance is your solid precaution against these potential risks. If you don’t get landlord insurance, you’ll be responsible for paying for the heavy financial consequences if the said risks become realities.
There are many advantages of obtaining landlord insurance upon making such a serious investment in your purchased property. A landlord insurance policy is crucial to protect your investment because accidents happen without warning.
Here are some of the benefits of landlord insurance:
Your financial future will be protected in case any loss arises from a covered inconvenience.
The landlord insurance policy coverage is quite comprehensive.
You’ll have peace of mind knowing you have a plan you can rely upon.
With the additional coverage of Guaranteed Income Insurance, you’ll experience no financial loss even if your tenant simply doesn’t pay their rent.
The Bottom Line
If you’re not going to use your property as your primary residence but rent it out to a tenant, a homeowners insurance policy will probably fail to cover all your liabilities and future potential damages to the property. If you rather have full protection regarding your rental and even your income deriving from it, it’s crucial that you opt for landlord insurance.
A combination of a landlord insurance policy and a renter insurance policy is sure to be the ideal option that covers the interests of both parties. So, while getting your landlord insurance, you might as well want to convince your tenant to obtain renter insurance.
What does landlord insurance cover?
Insurance landlord covers rental loss deriving from the uninhabitable state of the property due to covered incidents, damage done to the property by windstorms, fires, theft, vandalism, and liability protection. You can also purchase add-ons such as flood insurance or Equipment Breakdown Coverage.
What is excluded from the landlord insurance policy coverage?
Floods, earthquakes, water backups, the tenant’s personal possessions, equipment breakdown, and maintenance costs are excluded from the landlord’s insurance policy coverage.
What is landlord liability insurance?
Landlord liability insurance is part of the landlord insurance coverage that protects you against liability claims and potential lawsuits to be filed regarding injuries of tenants or guests on your property, resulting from things that you’re legally responsible for.
What is landlord contents insurance?
Landlord contents insurance covers the replacement or repair of the interior items owned by the property owner. Landlord contents may include appliances, furniture, or a TV. Landlord contents insurance keeps the items you provide for your tenant safe against perils, accidents, and theft.
How do I determine the insurance sum for my property?
To avoid sudden out-of-pocket expenses, you need to make sure your insurance will cover the entirety of the damage your property got as a result of a covered peril or accident. Not to have any inconveniences in the future, it’s strongly recommended to consult a professional: an architect, a valuation expert, or a builder.
Why do I need landlord insurance?
Obtaining an insurance landlord is a must for a property owner who rents out their property instead of using it as their own primary residence because landlord insurance covers you against financial losses related to perils, accidents, or faults of the tenant.
What is renters insurance?
Renters insurance is a type of policy that covers the personal property of the tenant against damage done by perils, accidents, and theft. In case their residence becomes uninhabitable due to covered incidents, renter insurance also covers the temporary accommodation expenses. However, it doesn’t cover the personal property of a roommate or a guest, as well as not cover the damage caused by floods, earthquakes, and water backups. Although the renters insurance policy coverage includes the accidental injuries you cause others, it excludes liability for high-risk breed dog bites.
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