Rental property insurance is a must-have for every rental property owner, but there is some confusion as to what it is and what protections it offers. Gain a better understanding of this insurance policy below.
What Is Rental Property Insurance?
Rental property insurance, also known as landlord insurance, is a type of insurance that protects rental property owners from covered costs. It is generally not something landlords must take out by law, though some lenders may require it if you are renting out your property.
What Does Landlord Insurance Cover?
Rental property insurance is an essential form of protection that every landlord should consider purchasing. While it is not mandatory, it can help you with certain financial struggles should you encounter them.
The exact coverage of the landlord insurance policy will depend on the company you buy it from. But, most policies will offer two basic coverages: property and liability protection.
Property and Liability Protection
Property protection usually includes coverage for the actual dwelling and its structures as well as the landlord’s personal property. For example, if your rental property suffers damage from a fire or other covered perils, your insurance policy will help you pay for repairs. As for personal property, this only applies to those used to service the rental unit (i.e. a lawnmower or other equipment).
Keep in mind that landlord insurance, as its name suggests, will not cover the personal property of tenants. For that, you need renters insurance.
Liability protection, on the other hand, will help you pay for medical or legal fees in case someone gets injured on the rental property premises and you are found responsible. Some landlords will purchase a separate umbrella policy, though, if the liability coverage amount on their landlord insurance is not enough.
Other Forms of Protection
Apart from the basics, rental property insurance can also come with other coverages, whether they are inclusive or bought extra as riders. These can include:
- Vandalism. This additional protection can help cover the cost of repairs in case someone vandalizes your rental property or unit.
- Burglary. Traditional policies may cover damages caused by burglaries, but they don’t usually cover the cost of replacing the stolen items. Some providers, though, will let you purchase a rider that covers replacement costs of appliances and electronics.
- Loss of Rent. If your rental unit becomes uninhabitable as a result of a covered peril, this add-on will cover the cost of rent (instead of the tenant) for a defined period of time.
- Codes and Ordinances. If building codes require you to improve or upgrade your property after it becomes damaged, this optional coverage can help pay for the associated costs.
Landlord Insurance vs Homeowners Insurance
The main difference between homeowners insurance and landlord insurance is how the policy applies to you. More often than not, homeowners insurance only applies if you live in the home.
In comparison, landlord insurance applies to properties or units you rent out. Homeowners insurance may cover your property if you live in it and only rent out a room, though that is still subject to certain conditions depending on the provider.
Additionally, homeowners insurance covers the personal belongings of the homeowner, whereas landlord insurance only covers the items that are used to service the rental property. When it comes to liability protection, rental property insurance can help cover medical and legal fees in the event you are found responsible for a tenant or their guest becoming injured on the premises. Homeowners insurance, though, covers the residents regardless of where the injury occurs.
Landlord vs Homeowners Insurance: What Should You Get?
The answer to this question really depends on your situation. If you are renting out a property long-term, the obvious policy to get is landlord insurance or rental property insurance. But, the answer can differ when it comes to short-term rentals.
For infrequent short-term rentals or those that only take place in between longer breaks, homeowners insurance may be enough to cover your needs. Of course, it still depends on the requirements and conditions of your provider. As such, make sure to check with your insurance agent first.
In contrast, if you plan to rent out your home more frequently for short periods of time and to different people — think Airbnb and Vrbo — you might need a policy suited for commercial properties. This is because these rentals can be recognized as businesses. Some providers, though, do offer short term rental insurance designed specifically for this type of setup.
Landlord Insurance vs Renters Insurance
Many rental property owners get confused and think renters insurance is the same as rental property insurance. But, they are two entirely separate policies. Rental property insurance or landlord insurance offers protection to the landlord — you. On the other hand, renters insurance offers protection to the renter or tenant.
What does renters insurance cover? This type of insurance typically covers the personal belongings of the tenant, damages from covered losses, and personal liability damages. Many landlords require their tenants to purchase renters insurance, and it would be wise to do the same. There are providers that offer cheap renters insurance with sufficient coverage.
How to Find the Best Rental Property Insurance
There are several insurance companies that sell landlord insurance. While these can come at varied costs, especially when you buy optional coverage, you can generally expect to pay somewhere between $1,000 to $1,800 annually.
Still, it is best to ask providers to give you a landlord insurance quote. Keep in mind that rental property insurance typically costs about 15 to 20 percent more than your average homeowners insurance.
Here are some additional tips when looking for the best landlord insurance:
- Assess your needs as a rental property owner to determine what type of policy you should take out.
- Ask potential providers to send you a rental property insurance quote. While price will undoubtedly influence your choice, don’t let it be your sole deciding factor.
- Look at online reviews or ask fellow landlords to give you a recommendation.
- Understand your policy’s requirements and conditions. What perils are covered? How much is your coverage limit? Don’t be afraid to sit down with your insurance agent and play out specific scenarios.
A Necessary Safeguard
As a landlord, it is important to equip yourself with tools that can protect your assets and financial interests. Thus, your rental property insurance should remain a part of your property management arsenal. Of course, managing a rental property is not a simple task, especially when you don’t have professional assistance.
Florida Property Management makes it easier for you to address your rental property management needs. Look for the best company in Florida today using our online directory.