Do I Need Landlord Insurance? [Rental Property Safety]
Do you need landlord insurance? If you own any rental property — whether it’s a home, apartment, condo, or a room in your basement, the answer is probably yes.
Imagine you've decided to rent out your basement apartment to a college student. While your tenant is living there, a kitchen fire breaks out and causes damages.
If you only have standard homeowners insurance, it may not cover the repairs since the damage occurred in a rented portion of your home. However, landlord insurance would likely cover this type of incident.
Landlord insurance is specifically for people with rental properties, and it differs slightly from the coverage you get with a standard homeowners policy.
So, should I get landlord insurance? Here’s a closer look.
Key takeaways
- You need landlord insurance if you own property that you rent out to others.
- Landlord insurance typically includes dwelling coverage, liability coverage, and loss of rental income after a covered event.
- The cost of landlord insurance is about 25% more than that of a standard home insurance policy.
- Landlord insurance is not a legal requirement, but your mortgage lender may say you need it.
- An insurance agent can help you choose what types of landlord insurance you need for your rental property.
Do I need to have landlord insurance by law?
There is no state law that specifically says landlord insurance is required or mandatory. However, if you have a mortgage lien against your rental property, your lender will require you to have landlord insurance to protect their investment.
So, is landlord insurance worth it? Even if your lender doesn't require it and your local government doesn't mandate it, having a policy is still a good idea. Without it, you could be on the hook for all types of financial losses:
- Repairs after a fire, storm, break-in, or other covered peril
- Replacing stolen appliances or fixtures
- Legal fees if a tenant sues you for injuries on your property
- Lost rental income if a tenant can’t live in your unit after a covered event
- Medical bills if a tenant or visitor gets hurt on your property
- Damage caused by tenants, their pets, or their guests
Did you know?
Landlord insurance costs are usually tax deductible as a business expense.
Why do I need to get landlord insurance?
You need landlord insurance to protect your investment property from potential financial losses. Even with good tenants, you could find yourself needing to file a claim.
For instance, say you own a single-family rental home. One night, a severe storm hits and causes a tree to crash through the roof. The damage is extensive, and your tenants are forced to move out while repairs are made.
Without landlord insurance, you would be responsible for the repairs and losing rental income during the restoration period.
In this situation, a landlord insurance policy would likely cover the cost of repairs to the roof and other damaged areas of the home. It would also provide coverage for the loss of rental income while the property is empty.
But landlord insurance doesn't just cover property damage. If your tenant slips on a loose floorboard and breaks their arm, they may file a lawsuit against you for medical expenses and pain and suffering. Liability coverage under a landlord policy would help cover your legal fees and any settlement or judgment against you.
Even if you're just renting out part of your home, like a garage apartment, your regular home insurance probably won't cover problems with renters. That's why having a separate landlord policy is so important.
Who needs landlord insurance?
If you own real estate that you don’t occupy yourself but rent out to others, you probably have to have landlord insurance, even though it’s not required by law. This includes:
- Single-property landlords. If you own a separate rental property, like a single-family house or a duplex, you need a separate landlord policy. Even if you only rent it out to long-term tenants, your regular homeowners insurance won't cover that property.
- Multi-property managers. If you own and manage multiple rental properties, landlord insurance is essential. You may need a commercial policy or separate policies for each property, depending on the size and scope of your rental operation.
- Owners renting out part of their home. If you rent out part of your home, like a basement apartment or a garage unit, your home insurance might cover some stuff, but it probably won't cover any damage or injuries related to your renters. A landlord policy can fill in those gaps.
- Accidental landlords. If you end up renting out your home because you can't sell it or you had to move suddenly for work, you still need the right insurance to protect you in the meantime, even if you're not planning on being a landlord long-term.
- Condo owners who lease out their units. Your condo association's insurance usually only covers the building itself and common areas. You need your own landlord policy to cover your individual unit and any liability related to your renters.
Why get landlord insurance?
Basically, if someone is paying you money to stay in a property you own, you should have landlord insurance. It doesn't matter if they're staying for one night or one year — you want to be protected.
Think of it this way: your home insurance covers your home life. If you're running a rental business on the side, even just occasionally, you need business insurance too. That's what landlord insurance is — business insurance for rental properties.
How much landlord insurance do I need?
So, how much landlord insurance do you need? You want at least enough coverage to completely rebuild your rental property if it's destroyed. That means your dwelling coverage should equal your property's full replacement cost.
If your rental house would cost $250,000 to rebuild, you’d want at least that much in dwelling coverage. But don't forget about all the other stuff you could lose, like rental income while a home is being repaired after a covered event and liability insurance if a tenant gets injured and your negligence is to blame.
Often, landlord insurance costs about 25% more than a comparable homeowners policy. So, if home insurance would cost $2,600 per year for your property, landlord insurance might cost $3,250 per year.
The cost of landlord insurance is relatively small compared to the potential out-of-pocket expenses you could face without coverage. Consider this hypothetical example:
- Average annual premium for landlord insurance: $3,250
- Cost to rebuild a destroyed rental property: $250,000
- Lost rental income during repairs (6 months at $1,500/month): $9,000
- Liability claim for tenant injury: $100,000
What type of landlord insurance do I need as a landlord?
So, what insurance does a landlord need? Many DP-3 home insurance policies provide open peril coverage and replacement cost value (RCV) loss settlement for damaged items. They often include these landlord insurance coverage options:
- Dwelling coverage is for damage to the physical structure of your rental property, like if a fire burns down the kitchen or a storm rips off the roof. It may also cover other structures on your property, like a fence or shed.
- Liability coverage protects you if a tenant or visitor gets hurt on your property and decides to sue you. It could help pay their medical bills and your legal fees, including defense and attorney costs.
- Personal property coverage is for any belongings you leave at the rental to furnish or maintain, like a leaf blower or lawn mower. Your tenants will need their own renters insurance for their belongings.
- Loss of rent coverage or fair rental income coverage will reimburse you for rent if the property is unfit to live in after a covered event.
Depending on your insurance company, you may have the option to customize your policy with add-ons like these:
- Vandalism and burglary coverage may be limited in your primary policy. You may have the option to increase your limits with a rider if you’re worried about someone intentionally damaging your rental.
- Building code coverage if you need to make upgrades to meet current building codes during covered repairs.
- Vacancy coverage if your property is empty between tenants for an extended period.
Is additional landlord insurance coverage necessary?
Whether you need extra landlord coverage depends on your situation and risk tolerance. But in general, it's smart to at least consider adding coverage for:
- Burglary/theft. If you keep valuable equipment like lawnmowers or snow blowers at your rental, this can provide extra coverage if they're stolen.
- Vacancies. If your property is vacant for more than 30 or 60 days between tenants, your landlord insurance may not reimburse you for claims. Check if you can add a vacancy rider during these times.
- Building code upgrades. If you own an older property, this can help cover the extra costs of bringing it up to current codes during covered repairs.
The more protection you have, the less likely you are to be stuck paying out of pocket for an expensive problem. An insurance agent can help you figure out which additional coverages make sense for your rental property.
Strategies for minimizing landlord insurance claims
Even if you need landlord insurance, there are steps you can take to minimize the likelihood of filing a claim.
- Screen tenants thoroughly. Conduct background, credit, and reference checks on potential tenants to find reliable renters who will take good care of your property and pay on time.
- Inspect properties regularly. Write into your rental agreement that you’d like to check on the property once per year or every six months. This allows you to check for leaks, ensure smoke detectors work, and look for signs of wear.
- Make prompt repairs. Encourage your tenants to report problems immediately, and have a reliable network of contractors and service professionals ready to handle repairs.
- Make expectations clear in the lease. Spell out what tenants are responsible for, like keeping the property in good shape and having renters insurance. A solid lease can help prevent problems and protect you if conflicts come up.
Still have questions?
Still have questions about landlord insurance requirements? Browse these frequently asked questions or chat with a Hippo agent today.
Can I have landlord insurance without homeowners insurance?
If you don't live in the property you're renting out, you don't need homeowners insurance. Landlord insurance is specifically for rental properties, while homeowners insurance is meant for owner-occupied homes. You can purchase landlord insurance separately.
Does landlord insurance provide coverage for the personal belongings of my tenant?
No. Your tenant needs their own renters insurance policy for their personal items. Renters insurance will help replace their belongings if they’re lost, stolen, or damaged by a covered event. These policies also include liability coverage if your tenant is sued. Landlord insurance does not cover a tenant’s personal belongings, so it is up to them to secure that protection themselves.
What types of rental properties would require landlord insurance?
Any property you own and rent out to others should have landlord insurance. This includes single-family homes, multi-family properties, condos, apartments, and vacation rentals. If someone else is paying you rent, it's a good idea to have landlord insurance.
Do I need landlord insurance for a flat or a condo?
Yes, you most likely need landlord insurance for condos, flats, and other properties you rent out. Your condo association's insurance likely only covers the building's exterior and common areas, not your individual unit. Landlord insurance can protect your rental property from damage caused by tenants or covered events like fires or storms. It may also cover legal fees if a tenant sues you.
Do I need landlord insurance and building insurance?
If you own a freestanding rental property, like a single-family home, landlord insurance alone may suffice because it covers your building’s structure. If you're renting out a condo or flat, your condo association should have building insurance for the common areas.
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