Whether you're already renting out a second property to the public or are still in the planning phase, considering the coverage you need to allow this dream to continue or come to life at all is critical. Without the right type of insurance, your rental property could end up sending you into lawsuits, bankruptcy, or worse.
Luckily an independent insurance agent can help you find all the coverage you need to keep your rental properties safe. Up first, though, here's a breakdown of which types of coverage you need for a rental property as the landlord.
Do You Need Landlord Insurance for a Vacation Rental?
Since your homeowners insurance only covers your primary residence, you'll need a separate policy for secondary properties and rental units. Having landlord insurance is essential in case your renters claim that you caused them injury or property damage at your rental property. Make sure to work with an independent insurance agent to get equipped with the right landlord insurance before ever renting out your property to your first tenant.
What Does Landlord Insurance Cover?
Landlord insurance covers the dwelling and contents as well as your liability, other structures, and additional living expenses. This coverage is designed to protect you against guest incidents, such as injuries, that occur at the property you’re renting out, or your costs if the tenants cause damage to your property.
Landlord insurance comes with the following coverages:
- Dwelling coverage: This covers the physical structure of your rental property if it gets damaged by a covered peril like a lightning strike, fire, etc.
- Personal property coverage: This covers your personal property at your rental unit, including furniture, toiletries, dishes, etc., if they get damaged by a covered peril or stolen.
- Other structures coverage: This covers damage and destruction by listed perils to other structures that aren't permanently attached to your rental property, including garages and sheds.
- Liability coverage: This covers your legal expenses if one of your renters, or another third party, claims that you or your rental property caused them bodily injury or personal property damage and sues you.
- Additional living expenses coverage: This covers extra expenses like hotel stays if your rental property becomes temporarily uninhabitable due to a covered peril like a fire.
An independent insurance agent will help ensure that you walk away with a landlord insurance policy that covers all of your concerns about renting out your property to the public.
What Happens if the Tenants Sue Me?
If your tenants sue you, you'd rely on the liability coverage provided by your landlord insurance to pay for your legal fees like attorney, court, and settlement costs. Your liability covers you against legal fees in case of claims for third-party bodily injury or personal property damage. If you think you may need more liability protection, you may want to consider adding a personal umbrella insurance policy.
Umbrella insurance can extend an existing policy's liability coverage to limits of $1 million or higher. These policies are an affordable way to dramatically increase your liability protection. Talk with your independent insurance agent about umbrella insurance, and they'll be able to advise on whether it's right for you.
How Much Does Landlord Insurance Cost?
You can typically expect to pay about 15% more for a landlord insurance policy than you would a homeowners insurance policy. But the cost of your coverage will depend on a number of factors, including the value of your rental property, the value of your contents, how much liability coverage you need, and if your rental property has any amenities that could pose extra risks, such as a pool or trampoline. An independent insurance agent can help you get exact quotes for landlord insurance in your area.
If I Turn My Rental Property into an Airbnb, Do I Still Need Insurance?
If you rent out your property frequently on a short-term basis, landlord insurance might not provide the coverage you need. Instead, you may need a commercial liability package. However, Airbnb does provide its own coverage for landlords who rent out their homes to the public through the service.
Depending on your personal needs, Airbnb's supplied insurance might not be sufficient. If that's the case, your independent insurance agent can help you supplement your coverage with commercial liability insurance and any other protections you may need. Your independent insurance agent can also help you review your existing Airbnb coverage to determine if you need to purchase supplemental insurance or not.
Understanding How Landlord Insurance Helps Protect Your Investment
Two of the biggest critical areas in which landlord insurance helps protect your investment are from a property damage standpoint and a liability standpoint.
How landlord insurance protects against rental property damage:
- Say a lightning strike hit your rental property, causing damage first upon impact, but then even more damage from a resulting fire. In this case, your landlord insurance could help reimburse you for the repairs or rebuilding required. It could also help reimburse for repairs or replacement to your rental property's contents that might've gotten damaged or destroyed.
- Your landlord insurance policy might also cover tenant damage to your property, in case one of your renters causes a fire or other incident that results in damage. Look for a landlord insurance policy that includes this coverage, or add it if not. Make sure to review your landlord policy's limits in every coverage area and increase them if you feel it's necessary.
How landlord insurance helps protect against liabilities:
- Say a visitor got injured after falling down the stairs at your rental property. If the fall was their fault, such as if they were intoxicated, you shouldn't be held liable for their injuries. However, if the tenant claims the fall happened because your stairs were not sturdy or you had a loose rug at the top of the staircase, you could end up getting sued.
- Your landlord insurance's liability coverage could help reimburse you for your legal expenses if you got sued for a tenant's injuries. Your coverage could also help pay for their medical treatments.
Note that in either case, you'd first be responsible for paying your policy's deductible amount in whichever category before you'd start receiving reimbursement for your claim through your insurance. An independent insurance agent can help you find a landlord insurance policy with a low deductible amount, but that can likely result in a higher premium. Regardless, having the right kind of landlord insurance before you ever rent out your property to the public is one of the keys to a successful business venture that can continue for years to come.
Why Choose an Independent Insurance Agent?
Independent insurance agents simplify the process by shopping and comparing insurance quotes for you. Not only that, but they’ll cut through the jargon and clarify the fine print so you'll know exactly what you’re getting.
Independent insurance agents also have access to multiple insurance companies, ultimately finding you the best landlord insurance coverage, accessibility, and competitive pricing while working for you.
TrustedChoice.com Article | Reviewed by Jeffrey Green
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