Landlord Insurance: Rental Property Insurance Coverage Types and Why it is Needed

Whether you rent out several properties to long-term renters or rent a spare room to earn income, renting a property can be lucrative. But it also comes with new challenges and responsibilities, like paying rental taxes and safeguarding your investment with landlord insurance.

Insurance is a key consideration for rental property owners who rent out any dwelling space. Renting out property without the proper insurance coverage could lead to financial vulnerability. Keep reading to learn about landlord insurance, what it covers, and who needs it.

What is landlord insurance?

Landlord insurance, also called rental property insurance or rental home insurance, covers the risks associated with renting out your property to tenants. This type of insurance is designed to protect the property owner and landlord. This type of rental home insurance will provide certain protections if your property is damaged or if someone is injured on your property. Some policies may even cover the loss of rental income. We’ll dive into the specific landlord insurance coverage types later in this post. If you’re investing in real estate with the intention of becoming a landlord, read on!

Is landlord insurance required?

States don’t require rental property insurance, but it’s generally recommended. If you work with a lender to finance the purchase of your rental property, they could require it as a condition of your mortgage. Whether you want landlord insurance may also depend on how often you rent your space and how long tenants stay in the property.

• Long-term rentals: If you rent out your property for more extended periods of time, like several months or years, this insurance can offer valuable protection from potential financial losses.
• Short-term rentals: If you regularly rent your property as a short-term rental to different renters on a platform like Airbnb or VRBO, your revenue-generating activity may be considered a business by the Internal Revenue Service (IRS). In this case, traditional renters or homeowners insurance may not suffice. You could also consider home-sharing insurance.
• Occasional short-term rentals: There are some cases where homeowners insurance may be sufficient. If you only list your home on vacation rental sites for a few weekends per year, your homeowner’s insurance policy may provide enough coverage for the rental property. Read the details of your policy closely to ensure you understand whether or not you’re covered.

The bottom line is it’s worth the time to check with your insurance agent to confirm that you’re covered for the ways you are using your rental.

What does landlord insurance cover?

So, exactly what does landlord insurance usually cover? When you purchase a standard landlord insurance policy, you generally get a broad range of coverage. Each coverage type will likely be subject to an individual deductible. Here’s a breakdown of the coverage types typically included:

Type of coverage	What it covers
Dwelling coverage	This coverage often protects you financially against damage to the structure caused by problems like fire, wind, hail, and lightning.
Liability coverage	Liability protection covers you financially if you’re found legally liable for someone else’s medical bills or property damage related to the rental property. It also usually covers your legal defense if sued. For example, if a tenant gets injured on the property and tries to sue you, this part of your insurance will likely cover you.
Personal property	This coverage is sometimes seen as less important. However, if you rent your property furnished or leave any personal property that tenants can use (like lawnmowers or appliances), it can be covered by personal property coverage.
Loss of rental income	Loss of rental income or loss of use coverage covers missed rent payments if your rental property becomes unusable due to a problem listed in your policy, like a fire.

Like most insurance policies, landlord insurance is customizable to fit your specific insurance needs. Here are some common, optional rental property insurance coverages you can consider adding to your policy:

• Building codes
• Burglary
• Personal injury
• Property under construction
• Vacant property endorsement
• Vandalism

What rental home insurance doesn’t cover

Certain expenses are not usually covered by a landlord insurance policy. Coverages often not included:

• Acts of war
• Asbestos removal
• Earthquakes and floods (these disasters tend to require separate policies)
• Erosion, mudslides, or other natural disasters
• Neglect
• Routine maintenance or equipment failure
• Shared property
• Tenants’ personal property
• Volcanic activity

Landlord insurance vs renters insurance

As a landlord or property owner, differentiating the different types of insurance can be confusing, especially regarding rental property insurance vs renters insurance.

Landlord insurance covers the property owner and the physical structure. Renters insurance, otherwise known as rental insurance, is for the tenant and covers their belongings. You and your renters will have your own separate policies.

Landlord insurance vs homeowners insurance

Landlord and homeowners’ insurance both offer dwelling and liability coverage. However, landlord insurance provides additional coverage that landlords might need, such as loss of rental income and other add-ons.

Where they differ is the insurer type: Landlord insurance is for property owners who rent out their property, and homeowners insurance is for homeowners. In addition, insurance for landlords typically costs more than homeowners’ insurance.

Cost of landlord insurance

Like most insurance quotes, landlord insurance quotes will depend on several factors. We recommend shopping around and comparing quotes before making a final decision. Premiums are adjusted to match the increased risk renters bring. This is one reason why landlord insurance tends to cost more than homeowners insurance. Other factors that influence the cost of insurance include:

• Deductible
• Discounts
• Location
• The cost to rebuild the property
• Your insurance company

More help with your property business needs

Insurance for landlords managing rental properties can add up. But having contingencies to protect your interests as a landlord is wise. Landlord insurance protects you from costly damages and safeguards your rental property investment.

Owning properties comes with many rewarding challenges and responsibilities before adding landlord insurance to the list.

While Block Advisors doesn’t offer insurance, we can help you offload other important tasks. Our experts can be your go-to for small business needs, from bookkeeping services and payroll to small business tax preparation.

Speak with a certified small business pro today.

---

This article is for informational purposes only. The content may not constitute the most up-to-date information and should not be construed as legal advice.