Landlord Insurance Coverage Options and Policy Features Explained

As a landlord, you face unique risks that your standard homeowner’s insurance won’t cover. Whether it’s a tenant who causes property damage, a liability lawsuit, or unexpected repair costs, the financial burden can be significant. 

Landlord insurance provides crucial protection for your investment, offering peace of mind and safeguarding your rental business. 

In this simple guide, we’ll unpack the coverage options available to landlords and the key features you need to know about.

What is landlord insurance?

Landlord or rental property insurance is a specialized insurance policy designed to protect rental property owners from financial losses. It covers various risks specific to landlords, such as: 

• Loss of rental income
• Property damage
• Legal expenses
• Liability claims

It’s important to note that this insurance differs from renters insurance policies. Why? Renters insurance is designed to protect tenants (not landlords) and their personal property. 

Why you need insurance as a landlord

Imagine a tenant accidentally starting a fire, a burst pipe flooding your rental unit, or a visitor slipping and falling on your property. Without landlord insurance (which includes liability coverage), you’d be personally responsible for covering the following: 

• The repair costs
• Medical bills
• Legal fees

Let’s face it. The above can quickly add up to thousands of dollars.

Consider the following statistics:

• Property damage: The average cost of a home fire is around $13,000 but can go as high as $72,300. Water damage restoration costs can range from $1,300 to over $5,000.
• Liability claims: The average settlement for a slip and fall lawsuit is $10,000 to $50,000.
• Loss of rental income: You can’t rent a damaged property, so if your property is damaged, you could lose rental income for weeks or months.

These are just a few examples of how quickly expenses can pile up, potentially jeopardizing your rental business. Landlord insurance protects you from these financial setbacks, ensuring your investment remains secure.

Landlord insurance coverage options

Most insurance companies offer landlord policies that include several key coverage options tailored to address the specific risks associated with renting out a property.

Landlord property protection

This coverage protects the structure of your rental property from:

• Certain types of water damage
• Covered perils
• Fire damage
• Windstorms
• Vandalism
• Theft

Property protection typically covers the dwelling and any attached structures like garages or sheds. It may also cover detached structures like fences or retaining walls but not other types of personal property.

Landlord liability coverage

Accidents happen. If they happen in your rental property, someone could get injured, or their belongings are damaged. And if you’re found legally responsible, landlord liability protection can cover the associated costs. These include: 

• Legal defense costs
• Medical expenses
• Settlements
• Judgments 
• Court fees

Loss of rent or loss of rental income protection

Suppose a fire or other covered event renders your rental property uninhabitable. In that case, this coverage can reimburse you for lost rental income while you repair your property. 

This coverage is helpful for maintaining cash flow and covering your mortgage payments and other expenses.

Legal expenses insurance

Landlord-tenant disputes can quickly escalate, leading to costly legal battles. 

Apart from liability insurance, most types of landlord insurance cover legal expenses like:

• Expenses associated with evictions, lease disputes, and other legal matters
• Attorney fees
• Court costs

Additional coverages to consider

Some landlord insurance companies offer optional coverage add-ons like these:

Rent guarantee insurance

This coverage can reimburse you for loss of income if your tenant fails to pay, providing an extra layer of financial security.

Home emergency coverage

This coverage can help cover the cost of emergency repairs for things like: 

• Heating system breakdowns
• Electrical failures
• Plumbing leaks

Landlord insurance policy features

Understanding the key features of a landlord insurance policy is essential for choosing the right coverage and maximizing your protection.

Premium payments

Landlord policy premiums are typically paid annually or semi-annually, with some insurers offering monthly payment options. 

Unlike homeowners insurance policies, landlord insurance premiums are often tax-deductible as a business expense, which can help offset the cost.

Deductibles of landlord insurance

A deductible is the money you pay out of pocket before your insurance coverage kicks in. 

Landlord insurance policies typically have higher deductibles than homeowners policies, but you can adjust this depending on your risk tolerance and budget. 

Typical deductible amounts for landlord policies range from $500 to $2,500.

Landlord insurance policy limits

Policy coverage limits refer to the highest amount of money the insurance company will pay for a covered loss. 

Rental property insurance policies generally provide distinct coverage limits for: 

• Loss of rental income‌
• Property damage
• Liability

It is crucial to choose limits that adequately protect your investment and provide sufficient financial security in case of accidental damage or other unforeseen circumstances.

Exclusions

Exclusions are specific events or circumstances not covered by your insurance policy. 

Standard exclusions in landlord insurance may include intentional damage caused by:

• Damage from floods or earthquakes 
• Lack of maintenance
• Neglect

It’s wise to thoroughly review the exceptions listed in your policy in order to comprehend the extent of your coverage.

Policy endorsements or riders

Endorsements or riders are optional add-ons you can purchase to enhance your standard landlord insurance policy. These can provide additional coverage for specific risks not covered or explicitly excluded from the standard policy, such as:

• Coverage for bedbug infestations
• Earthquake insurance
• Flood insurance

How much does landlord insurance cost?

On average, rental property insurance costs roughly 25% more than your standard homeowner’s insurance policy and runs for an average of about $1,100.

However, this cost varies significantly depending on several factors, including:

• Type of property (single-family, multi-family, condo)
• Coverage limits and deductibles
• Location of the property
• The property’s value
• Claims history

For example, average costs vary dramatically from state to state, ranging from slightly above $700 to over $2,400.

State	Average Annual Premium
Nevada	$739 (Lowest)
California	$903
Texas	$1,338
Florida	$1,721
Delaware	$2,419 (highest)

It also depends on the insurance provider and whether or not they offer landlord insurance discounts. Some of the largest companies providing landlord insurance policies include:

• Farmers Insurance
• Liberty Mutual
• Nationwide
• State Farm
• Allstate
• USAA

Landlord insurance vs. home insurance

While both landlord insurance and home insurance protect a home that’s part of your personal property, there are key differences:

Feature	Landlord Insurance	Home Insurance
Coverage	Protects rental property and landlord’s liability	Protects owner-occupied property and homeowner’s liability
Premium	Typically higher	Typically lower
Eligibility	Required for rental properties	Required for owner-occupied properties
Loss of rental income	Included	Not included
Tax implications	Deductible as a business expense	Not deductible as a business expense

Landlord insurance: It’s better to have it and not need it

Investing in landlord insurance is a wise financial decision for any rental property owner. The peace of mind and financial protection it offers far outweigh the cost of premiums. 

Choosing the right coverage will help you safeguard your investment, mitigate risks, and ensure your rental business thrives. And with the right rental property management tool, you can manage your insurance policies like a pro.

About the author

Vergine Melkonyan, Content Writer / Marketing Specialist

Experienced in writing SaaS and marketing content, helps customers to easily perform web scrapings, automate time-consuming tasks, and be informed about the latest tech trends with step-by-step tutorials and insider articles.