Understanding Landlord Insurance in Texas: Top Benefits

There are over 10 million landlords in the U.S., and a new rental unit is listed every 80 seconds. As the number of rental units grows, so do the responsibilities of being a landlord. Not only do you have to find good tenants, but you are also in charge of the property’s upkeep and maintenance.

But what happens if the property gets damaged in a storm or vandalized? Landlord insurance could help. Unlike homeowners insurance, which covers properties you live in, landlord insurance is tailored to protect rental property against damages, liability claims, and loss of rental income.

This article will help you explore everything about landlord insurance in Texas, including how much it costs and tips to lower insurance premiums.  

Key takeaways

• Landlord insurance in Texas is for homeowners who rent out their property instead of dwelling there.
• It is not legally required in Texas but is highly recommended to safeguard your property and investment.
• The cost of landlord insurance varies based on several factors, including property location, coverage limits, and property type.
• There are various strategies, such as bundling policies, multiple quotes, and increasing your deductible, that could help reduce your insurance premiums.

Is landlord insurance required in Texas?

Texas has no law that requires a landlord to carry insurance for their rental property. However, if your rental property has a mortgage, your lender may require you to purchase landlord insurance as part of the loan agreement. Even if your lender or law doesn’t mandate it, it’s smart for anyone who rents out a home, apartment, condo, or other units to consider landlord insurance. Protecting your property and rental income ensures your financial well-being in the face of unexpected events.

Let’s look at a few reasons why.

• Homeowners insurance won’t cover rental properties 

Most standard homeowners insurance in Texas only covers property you live in. If you start renting out your property, your current home insurance coverage policy likely won’t apply.

• There’s a high risk of natural disasters in Texas

While Texas is landlord-friendly and has a strong demand for rental property, it also ranks #1 for natural disasters and damage.

Since 1953, the state has experienced over 250 federally declared disasters, with at least one significant event reported nearly every year.

Some common disasters include:

• Wildfires.
• Hurricanes.
• Hailstorms.
• Tornadoes.
• Sinkholes.
• Erosion.

Landlord insurance in Texas, also known as rental property insurance or rental dwelling coverage, could help protect your properties from any naturally occurring disasters, liability claims, and other unexpected perils and events. 

So, do you need landlord insurance? The answer is yes if you want financial protection against risks such as tenant-caused damage, natural disasters, or liability claims for your rental property. Losing rental income due to disasters could significantly impact your ability to maintain the property or meet mortgage payments.

How much is landlord insurance in Texas?

Like other property owners, are you curious about how much landlord insurance is in Texas? Texas is one of the most expensive states for landlord insurance, with an average cost of $2,919 annually. 

However, your policy cost could change based on factors such as:

• How many rental units you own.
• The age, size, and condition of your properties.
• The number of ‘attractive nuisances’ at your rental property, such as pools.
• Your claims history.
• The location of your rentals.

Listed below are the landlord insurance costs by location.

Urban areas: Houston, Dallas, and Austin

In large metropolitan cities such as Houston or Dallas, premiums may be higher due to increased risks of property damage, higher property values, and greater tenant turnover. Landlords can expect to pay around $1,555 or beyond. 

Coastal regions

Coastal areas, such as Galveston or Corpus Christi, may also experience higher premiums because of the increased risk of hurricanes and flooding. Property owners in these zones may see costs ranging from $1,900 to $2,500 annually.

Rural areas: East Texas and Hill Country

Rural areas often have lower property values and reduced risks, bringing premiums down to around $1,000 to $1,200 annually.

Note: The above estimates are averages, and your actual costs may vary. So, consult with a local agent to better understand your area's rates.

Types of Texas landlord insurance coverage

Landlord rental insurance is designed to protect a home or property you own but don’t live in. It could help cover your dwelling and eligible structures on the property, select personal property, and even provide liability coverage. 

While Texas landlord insurance is similar to a home insurance policy, it has unique features tailored to rental properties. That being said, here are some landlord insurance coverage options you’ll find in a typical policy:

• Dwelling coverage: This coverage could help protect the structure of your rental property, including the floors, walls, and roof, if destroyed or damaged by a covered peril such as fire, wind, lightning, or smoke.
• Other structures coverage: Covers additional structures on your property, like fences, sheds, decks, or detached garages, if damaged by a covered peril.
• Loss of rent coverage: This coverage could help replace lost rental income if the property becomes uninhabitable due to a covered event. For instance, if a fire damages the home and it takes two months to repair, your insurance company will cover the lost rent during that time.
• Liability coverage: It pays for medical, legal, or repair expenses if a person is injured or their property is damaged and they are found at fault. For example, if a neglected tree on your property falls on a neighbor’s car during a storm, liability coverage would handle the repair or replacement costs.
• Medical payments coverage: This policy section covers small medical bills (typically $1,000–$5,000) if a person is injured on your property, regardless of who is at fault.

Some of the best landlord insurance in Texas could also cover a few select personal items you own that are used for the rental property, such as lawnmowers, kitchen appliances, or tools for maintenance.

Texas landlord insurance coverage exclusions

Although landlord insurance policy offers extensive coverage protection, there are certain things it usually won’t cover. 

Listed below are a few Texas landlord insurance coverage exclusions. 

• Personal property loss

Landlord insurance usually doesn’t protect against loss, theft, or damage to personal belongings.

• Tenant’s personal property

Standard landlord insurance policies won’t cover your tenants’ possessions, such as furniture, clothing, or electronics. To make sure their belongings are safe and covered, it’s best to encourage your tenants to get renters insurance.

• Tenant negligence

If a tenant fails to report an issue that leads to further damage, your landlord insurance likely won’t cover the repairs. 

For instance, a tenant may ignore a small leak, which could later result in a burst pipe. To avoid this, you should always urge your renters to report issues as soon as they arise.

• Normal wear and tear

Landlord insurance doesn’t cover normal wear and tear. This means damage that naturally occurs over time, such as faded carpets, chipped paint, or worn-out appliances.

• Intentional damage

If the tenant intentionally damages your property, such as breaking doors or vandalizing walls, landlord insurance won’t cover this.

In such cases, you may use the tenant’s security deposit or seek legal advice to recover costs.

• Emergency home cover

Emergency repairs, like fixing a boiler breakdown or an electrical failure, are not typically included in standard landlord insurance. However, you can add a home emergency policy for extra peace of mind.

Additional exclusions

Often, landlord insurance policies also exclude these two:

• Water or sewer backup damage: Property damage caused by backed-up sewer lines or flooding in basements doesn’t come under covered loss unless you add a specific endorsement.
• Flood or earthquake damage: Your standard landlord insurance in Texas doesn’t include coverage for floods or earthquakes. However, you can purchase additional endorsements, such as earthquake and flood insurance, for these risks.

Understanding these exclusions is increasingly important for property owners. That’s because it could help you take proactive steps like adding optional coverage or advising your tenants on their responsibilities to protect your property and investments.

How to lower your Texas landlord insurance premium

When it comes to protecting your rental property, skipping on landlord insurance isn’t a good idea. 

While saving money upfront may sound tempting, it could cost you much more in the long run if you face a lawsuit or property damage. 

Your top priority should always be safeguarding your property, not your income. Luckily, there are numerous ways a landlord could get discounts or lower their insurance cost without compromising coverage. 

Shop around for the best deal

Not every insurance company offers the same coverage at the same rates. To get the best deal, gather multiple quotes and compare them. This is because some companies may offer discounts or lower rates for the same coverage.

If possible, work with an independent insurance agent. They could help you find coverage tailored to your needs at a competitive price. An agent knows the ins and outs of policies and can save you time and money.

Bundle your policies

Combining multiple insurance policies, such as landlord, homeowners, or auto insurance, could yield substantial cost savings. 

Many insurance carriers provide discounts when you bundle policies, which makes it a smart move if you own multiple properties or need other types of coverage.

Not only could discount bundling save you money, it also simplifies insurance management, since everything is with one provider.

Raise your deductible

Choosing a higher deductible can lower your monthly premiums. While this means you’ll pay more out-of-pocket if you file a claim, it also reduces your overall insurance costs.

Find a balance: pick a deductible that saves you money but is still manageable if you need to cover a claim.

Improve your property’s security

A safer property could mean fewer insurance claims. Installing security cameras, deadbolts, smoke detectors, and fire alarms could deter theft, vandalism, and accidents. The best landlord insurance in Texas may offer discounts for these safety measures.

Investing in security systems shows you’re proactive, which could lower your premiums and make your property more appealing to tenants.

Regular property maintenance

Regular maintenance can prevent small problems from turning into big, costly issues. Fix plumbing, electrical, and structural issues promptly to reduce the chance of filing insurance claims.

Don’t forget about common areas, like sidewalks or stairs. Fixing hazards could prevent accidents and lawsuits, could help keep your premiums low.

Keep a clean claims history

Insurance companies check your claims history when setting your premiums. If you have made frequent or large claims, you might be seen as a higher risk. 

Avoid filing small claims and focus on keeping your property in good condition. After all, a clean claims record shows you’re a responsible landlord, which could help you qualify for better quotes and rates.

Require renters insurance

If possible, encourage or require your tenants to get renters insurance. This policy protects their belongings and could help reduce your risks as a landlord.

Even though renters insurance isn’t required by law in Texas, it’s a smart way to protect both you and your tenants.

Prepare for wind damage

Windstorms can cause serious property damage, especially in high-risk areas. In places like Texas, windstorm inspections from organizations like the Texas Windstorm Insurance Association (TWIA) could help you identify ways to strengthen your property’s protection and reduce premiums.

Still have questions?

Want to know more about landlord insurance in Texas? Here are some frequently asked questions:

Can landlords require renters insurance in Texas?

Yes, landlords in Texas can require tenants to carry renters insurance as a lease condition. This protects the landlord and the tenant by ensuring coverage for tenant property damage and liability.

How much is tenant insurance in Texas?

Although the average cost of tenant insurance in Texas can vary based on the coverage amount and location, renters can expect to pay as little as $20 per month (or $240 per year). This policy typically covers tenant belongings and liability.

What is the Texas flood law?

The Texas Flood Law requires landlords to inform tenants if a property is in a flood zone or has sustained flood damage in the last five years. However, it doesn’t mandate landlords to carry flood insurance, although it is highly recommended in flood-prone areas.

Who has the cheapest landlord insurance in Texas?

For landlords looking for the cheapest landlord insurance in Texas, companies such as State Farm, Allstate, and Farmers often provide discounts and competitive rates. However, the best option depends on your property’s location, coverage needs, and other factors.

What factors influence the price of landlord insurance in Texas?

The cost of landlord insurance in Houston, Dallas, and other areas depends on factors such as your property’s location, size, and condition, as well as the type of coverage you choose. Some other factors include your claims history, security measures, and whether the area is prone to risks like windstorms or flooding.