Landlording & Rental Properties

The BiggerPockets Guide to Landlord Insurance

Expertise: Landlording & Rental Properties
26 Articles Written
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If you own rental property, you must ensure you and your investment are properly protected. The right landlord insurance policy will cover any unexpected financial losses or massive expenses, protecting the profitability of your operation. It can also protect you from legal trouble. But what types of policies do you really need as a landlord?

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Related: Understanding Rental Property Depreciation: A Real Estate Investor’s Guide

What Does Landlord Insurance Cover?

Landlords’ insurance policies should cover property damage, liability, and lost rent if the property becomes uninhabitable. This insurance is a bit different than homeowners insurance and typically includes two types of coverage: property and liability protection. It’s especially important to remember to make the change from a homeowner’s policy to a landlord policy if you previously occupied the property.

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How Much Does Landlord Insurance Cost?

According to the Insurance Information Institute, landlord policies generally cost about 25 percent more than a standard homeowners policy to pay for increased protections. Your mortgage lender will typically require proof of a valid landlord insurance policy.

However, remember that insurance premiums are tax deductible for investors.

Are Landlords Required to Have Insurance?

Technically, landlords aren’t legally required to have any type of insurance. However, if you’ve taken out a loan on the home, the lender may require property owners to have a basic homeowner’s insurance policy. Just note that a conventional home insurance policy may not protect you if you’re renting out the property.

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Types of Landlord Insurance Coverage

To better understand the options available to landlords, here is a breakdown of additional coverage options to discuss with your insurance company.

1. Property Protection

Insurance policies designed for rental dwellings cover damage to the home from disasters like fire, lightning, wind, hail, ice, and snow. Standard landlord policies typically do not cover flood damage, so you will need to take out a separate flood insurance policy.

Insurance policy providers often refer to this type of protection as “dwelling coverage.”

2. Personal Property Protection

Landlord policies cover personal property left on-site for maintenance or tenant use, such as appliances and lawnmowers. But they don’t cover tenant property—only renters insurance does that.

Landlords can require that their tenants get renter's insurance as a condition of the lease. One of the major benefits of renter's insurance is avoiding disputes about who will replace personal property if damage occurs.

3. Liability Insurance

Landlord policies can include liability coverage. If someone falls on your property, for instance, liability protection covers legal fees and medical expenses.

Landlord Insurance Options

4. Rent Loss Protection

If damage renders your property uninhabitable, your landlord policy will cover the lost rent and pay you the amount of money you would have made in rental income. Rent loss insurance helps you continue to make mortgage payments when a tenant cannot occupy the home.

Rent loss protection isn’t necessarily a magic bullet. Many landlords are finding that coronavirus isn’t always a covered loss.

Landlords may also be able to get a form of business interruption insurance. This protects you from interruptions to their stream of rental income. For example, if an injury sidelines you, this compensation helps you keep things running.

5. Flood Protection

Flood insurance policies are run by the federal government through the National Flood Insurance Program (NFIP) and must be purchased in addition to your landlord insurance policy. Your flood insurance policy can include coverage for the building, its contents, and any replacement costs.

6. Acts of Nature Protection

Your dwelling coverage might limit or exclude certain types of damage. Your standard landlord insurance policy doesn’t always cover acts of nature such as earthquakes, hurricanes, and tornadoes. If you live in an at-risk area, discuss additional peril protections with your insurance provider. (Head’s up: some companies call this coverage “acts of God.”)

RELATEDProperty Insurance: Why Coverage Gets Dropped & How to Handle It

7. Cash Value vs. Replacement Cost

When repairing or rebuilding damaged property, an actual cost value policy will pay you the actual cost minus the depreciation value of damaged items. For example, if you purchased an appliance for the property that gets damaged in a fire, your insurer will value the actual cost of that appliance now (with depreciation) and pay you that amount. So, if you bought a washing machine for $600 three years ago, the insurer will depreciate the value of the washing machine to reflect its current three-year-old value. They won't give you the amount needed to purchase an equivalent replacement.

However, replacement value policies will provide a new washing machine with no out-of-pocket cost. Yes, actual cost coverage costs less. But if you would rather insurance take care of everything, consider replacement cost coverage.

As you can see, there are many things that must be considered when choosing your landlord insurance policy. It is important to read the policy carefully, discuss options with your agent, and ensure that you are fully protected.

Which of these policies do you have?

Let’s chat below!

Aside from being a landlord and real estate investor himself, Nathan founded Rentec Direct, a software company that serves the rental industry. Today he works with over 13,000 landlords and proper...
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    Gino Barbaro Rental Property Investor from St Augustine, FL
    Replied almost 3 years ago
    Nice article Nathan, thanks for sharing Gino
    Stu Basham from Jersey City, NJ
    Replied almost 3 years ago
    Thanks for sharing! I will definitely make sure we have these in place with our next rentals and current ones.
    Nathan Miller Property Manager from Grants Pass, OR
    Replied almost 3 years ago
    Hi Stu, It’s great to have an insurance agent that’s familiar with landlord policies and rental behavior. My current agent is excellent and has pointed me towards excellent policies. I did however have a previous agent who didn’t understand the landlord biz and as a result wasn’t always suggesting the proper policies. I could have been in hot water if something came up back then.
    Chad Drewson from LOCKHART, TX
    Replied almost 3 years ago
    any idea roughly how much more replacement cost is vs cash value? is one more popular?
    Nathan Miller Property Manager from Grants Pass, OR
    Replied almost 3 years ago
    Hi Chad, Replacement cost is a far more popular option because it’s really the more obvious choice for most investors. From an investors perspective, if your investment is damaged and not bringing in income it’s not much of an investment. Therefore replacement insurance is typically a more attractive option. As for cost, I tend to see the difference as little as $50-$80/year for an average property value of $200-300k.
    Craig England Investor from Colorado Springs, Colorado
    Replied almost 3 years ago
    Chad, I have found that replacement cost is often times not much more than an acv policy would be. It definitely depends on the company, property, and market you are purchasing in. In some cases it can be pretty significant, however there is a reason it costs less. Replacement cost tends to be more popular especially because of partial losses. If you need a roof replaced it will pay for labor and the cost of actually getting it put on rather than just paying for a pile of materials. Some experienced investors are willing to take the risk of having acv but as an insurance professional I would not recommend it for new investors or if you have a fairly small portfolio. Hope that helps and definitely feel free to reach out to me if you have more questions about it.
    Shauna Righellis from Tahoe Vista, California
    Replied almost 3 years ago
    Great tips! Thank you.
    Brandon P. from Joplin, Missouri
    Replied almost 3 years ago
    Perfect, thank you!
    Kurt Stresau Investor from Cocoa, Florida
    Replied almost 3 years ago
    What kind of policies are people using for multi-property scenarios? Surely some of the big owner/management companies with hundreds of properties are not maintaining independent policies on each of them…? Is anybody using multi-property policies? If so, what kind and where to find such a unicorn?
    Kurt Stresau Investor from Cocoa, Florida
    Replied almost 3 years ago
    What kind of policies are people using for multi-property scenarios? Surely some of the big owner/management companies with hundreds of properties are not maintaining independent policies on each of them…? Is anybody using multi-property policies? If so, what kind and where to find such a unicorn?
    Jason Barnett Flipper/Rehabber from Memphis TN
    Replied almost 3 years ago
    Thanks for the education Nathan!
    Joseph Boso
    Replied almost 3 years ago
    That was a discussion, l will like to know where I can find those multi family insurance for landlords. I have two rental properties in Cleveland Ohio.
    Joseph Boso
    Replied almost 3 years ago
    That was a great. discussion, l will like to know where I can find those multi family insurance for landlords. I have two rental properties in Cleveland Ohio.
    Eileen Mark Insurance Agent from Chicago, Illinois
    Replied almost 3 years ago
    Try your local Farmers Agent, and ask them if they write policies with Foremost. If they do not, try another agent, or call Foremost directly. Landlord policies are a favorite of theirs, as are vacant policies. Good luck!
    Eileen Mark Insurance Agent from Chicago, Illinois
    Replied almost 3 years ago
    I am an Farmers Insurance Agent and I work with many landlords. Lately, the replacement cost policies are coming in very close to the ACV policies in the company I represent, Foremost. Today I actually quoted one in which the premium for the RC was slightly less. That is a first for me, but Foremost offers a discount for their Platinum Package on their Landlord Protector Policy that gives a significant discount, and I believe that is why my RC quotes are coming in so competitively priced as of late. The Foremost package will not cover tenant vandalism, however. The Farmers Landlord Protector does cover tenant vandalism, but you must have your primary home insured with Farmers in order to satisfy the underwriting guidelines. If you are in Illinois, give me a call. I’d love to help you save money on your Landlord policy, and help you choose the right coverage for you!
    Tom Stokes
    Replied 9 months ago
    any recommendations for an agent in houston, tx?
    Eric Schultz Investor from San Diego, CA
    Replied almost 3 years ago
    @NathanMiller Great info and examples. I recently established a landlord policy on my latest deal, and it was nice to have confirmation on the different coverages. Thanks for sharing!
    Daniel Mina from Plano, Texas
    Replied almost 3 years ago
    Does the same apply if you are renting out a shirt term room of a primary residence?
    Nathan Miller Property Manager from Grants Pass, OR
    Replied almost 3 years ago
    Hi Daniel, Short term rentals are often a different policy and depending on how short it might be covered under standard policy. But it would be best to contact your agent and be very clear with them what you are doing with the short term rentals so they can recommend the appropriate coverage.
    Matt Franklin Rental Property Investor from Portland, OR
    Replied over 2 years ago
    Thanks for this article, Nathan — I really appreciate the information. I just received an insurance quote for my first single-family investment property and my big concern is the liability component. On my quote, there’s Premises Liability of $100,000 and Medical Payments at $500 per person/25,000 per occurrence. I’m wondering if these are standard levels of coverage, because it seems low to me. Are there rules of thumb you use for coverage levels relating to liability?
    Owen Rosen Professional from West Bloomfield, MI
    Replied 9 months ago
    The premises liability is the lowest you can typically purchase. If your assets exceed 100k you need more...
    Alex Saleeby Specialist from Beaumont, TX
    Replied about 2 years ago
    Recommend you consider a general liability policy to cover this and other properties. The benefits should pick-up where the individual property policy ends. Getting a $1M commercial policy is not that expensive and well worth the investment if you ever need it.
    Alex Saleeby Specialist from Beaumont, TX
    Replied about 2 years ago
    Nathan, thanks for the article. Informative and spot it. Totally concur on the replacement cost coverage vs “cash value” which is BS. I believe the latter is more profitable for insurance companies as the potential benefit/payout decreases over time (due to depreciation). I bet the premium does not though. If anything, it will likely increase, improving the spread even more. Replacement values is the way to go for my properties.
    George Lui Investor from Palo Alto, CA
    Replied over 1 year ago
    Great article! Informative and useful! Reminded me to review the policies for my current properties.
    Jacob Stoecker from Minneapolis, Minnesota
    Replied over 1 year ago
    Are landlord policy’s and commercial policy’s different?
    Owen Rosen Professional from West Bloomfield, MI
    Replied 9 months ago
    it's mostly semantics but if you have a large schedule of homes it could be very different than an individual "landlord" policy
    Owen Rosen Professional from West Bloomfield, MI
    Replied 9 months ago
    #7 is crucial. People tend to think they will insure for what they paid for the property which is usually much less than full rebuild cost. The problem with that is most claims are NOT total losses. So, if you have a kitchen fire and the kitchen is 20 years old, do you want a few thousand dollars when the repairs might cost tens of thousands? It's important to work through these potential issues with a knowledgeable agent.
    Emideline Saint Paul
    Replied 6 months ago
    Any suggestions for Georgia agents It been hard because everyone I contacted want to offer me homeowners insurance for my single family and multifamily properties