8 Reasons Why You Need Landlord Insurance

Every rental property comes with risks, but landlord insurance helps keep those risks from turning into financial setbacks. It protects your property, covers common issues with renting it, and gives you more control when the unexpected happens.

Is landlord insurance coverage worth buying? This guide breaks down eight reasons why it’s a smart move for any rental owner.

Why Do You Need Landlord Insurance?

A single fire, storm, or liability claim can drain months of rental profit. Landlord insurance covers repairs, legal fees, and lost rent, so unexpected costs stay off your balance sheet. Here are eight reasons why you need landlord insurance coverage:

1. Building protection is the primary feature;
2. Your rental income remains secure;
3. Liability coverage defends you in a lawsuit;
4. Protection from tenant damage is included;
5. The coverage extends to detached structures;
6. Emergency repairs are covered;
7. Mortgage lenders require it, and
8. You can customize your protection.

Building protection is the primary feature

Landlord insurance pays to repair all the rebuild costs of the rental property when disaster strikes, covering the roof, walls, floors, built-in appliances, and detached garages.

Typical threats it handles:

• Fire and lightning
• Wind, hail, and fallen trees
• Burst pipes, plumbing leaks, and resulting water damage
• Theft, break-ins, and vandalism
• Explosions, smoke, and vehicle impact

Policies often reimburse at full replacement cost, not depreciated value, and you can add riders for flood damage claims or earthquake insurance to close any gaps.

Your rental income remains secure

When fire, wind, or a burst pipe makes the unit unlivable, “fair rental value” coverage replaces the payments you would have collected. Most landlord policies set this benefit at roughly 20 percent of the dwelling limit and pay for it as long as repairs take up to 12 months. 

What it handles

• Lost rent during covered rental property repairs
• Optional rent-guarantee add-ons that pay when a tenant stops paying, with carriers offering six-week to six-month coverage windows and help with eviction costs 

Liability coverage defends you in a lawsuit

One trip-and-fall or faulty handrail can land a landlord in court. Landlord liability coverage pays legal defense, medical bills, and court judgments when a tenant or visitor claims injury or property damage.

What it covers

• Bodily injury: Medical costs and settlements for slips, dog bites, or stairway falls.
• Property damage: Replaces a tenant’s belongings or a guest’s car paint when building faults cause harm.
• Legal defense: Attorney fees, expert witnesses, and court costs up to your limit.
• Typical limits: $100,000 to $1 million per occurrence with aggregates up to $2 million, plus $5,000–$10,000 medical-payments sub-limits.
• Umbrella option: Add another $1 million or more in protection if a big claim exceeds the base policy.

Protection from tenant damage is included

One of your biggest concerns as a landlord is the risk of a tenant damaging your property. Your landlord insurance is specifically designed to protect you financially from certain types of tenant damage, but it's crucial to know what is and isn't covered.

What Your Policy Typically Covers

• Accidentally starting a fire that damages the kitchen, such as a cooking mishap.
• Causes significant water damage, like letting a bathtub overflow, which ruins the floor and the ceiling below.

This coverage is for large-scale accidents that a security deposit could never cover.

What Your Policy Does Not Cover

It is just as important to understand what your landlord insurance policy doesn't cover. Landlord insurance will not pay for:

• Intentional Damage: It is not covered if a tenant maliciously destroys your property, like punching holes in walls, breaking windows on purpose, or spray-painting floors.
• Normal Wear and Tear: The gradual scuffing of walls, fading of paint, or wearing down of carpets from everyday use is considered a routine cost of doing business. These maintenance expenses are your responsibility as the property owner.

The coverage extends to detached structures

Many properties also have other structures that need protection. Your landlord insurance policy typically extends its coverage to these separate structures, giving you peace of mind that your entire property is secure.

This "other structures" coverage is a standard part of most landlord insurance policies. It helps you pay for repairs or rebuilding if a covered event damages these detached structures, such as a fire, a falling tree, or storm damage.

Common detached structures covered by your landlord policy include:

• A separate garage
• Driveways
• Storage sheds
• Fences
• A gazebo or a carport

Think of it this way: if a heavy windstorm knocks down the fence surrounding your rental property, your landlord insurance can help cover the cost of replacing it. Without this coverage, you would have to bear the entire cost of these costly repairs. It’s one more way this insurance works to protect your complete investment.

Emergency repairs are covered

After a significant event like a fire or a severe storm, your rental dwelling policy can help you pay for the immediate, temporary repairs needed to secure your property and protect it from further harm.

Taking quick action is often a requirement of your policy. The goal is to make the property safe and mitigate any additional losses while you wait for the central repairs to begin. Your landlord insurance can reimburse you for these emergency expenses as part of your claim.

Common emergency repairs covered by your policy include:

• Tarping a damaged roof prevents water from leaking into the house after a storm.
• Boarding up broken windows or doors protects your property from theft or vandalism.
• Hiring a plumber to stop a major leak after a pipe bursts to prevent widespread water damage.
• Winterizing the property involves draining the pipes to stop them from freezing and bursting.

Without this coverage, you would have to pay for these urgent and often costly repairs out of your pocket just to secure the property before the real restoration work even begins.

Mortgage lenders require it

Mortgage lenders demand proof of landlord or dwelling-fire coverage before closing on a rental loan. They want the structure insured at replacement cost, liability limits that protect their collateral, and a deductible that is not too high. If you let your policy lapse, the bank can buy force-placed insurance that costs more and only benefits them, not you.

What lenders look for

• A declaration page listing the lender as mortgagee
• Dwelling limit at 100 percent of replacement cost
• Liability limit of at least $100,000 (often higher for multi-unit buildings)
• Deductible capped at 1–2 percent of the insured value
• Proof of paid premium at every renewal

Keeping these boxes checked prevents costly force-placed coverage and keeps refinancing or future borrowing on track.

You can customize your protection

No two rentals face the same risks, so carriers let you bolt on extra protection beyond the basic policy. Here are the most common endorsements and what they cover:

• Flood insurance: Pays for damage from rising water, usually bought through the NFIP or a private flood rider.
• Earthquake coverage: Repairs for shake damage in zones where quakes are excluded from standard policies.
• Rent-guarantee (default) insurance: Replaces lost income if a tenant stops paying and can help with eviction costs.
• Equipment breakdown: Fixes or replaces HVAC units, water heaters, and built-in appliances after sudden mechanical or electrical failure.
• Service line coverage: Pays to dig up and repair broken underground water, sewer, or power lines that run from the street to the home.
• Ordinance or law upgrade: Covers the extra cost of bringing the property up to current building codes after a covered loss.
• Umbrella liability: Adds another $1 million or more in protection when a lawsuit exceeds the base policy limits.

Mix and match these add-ons to plug the gaps that matter most to your rental business.

Lock In Protection with Obie Landlord Insurance

Stop worrying about fires, lawsuits, and lost rent; Obie’s tech-driven landlord insurance quotes in minutes, tailored to each property and priced to keep cash flow strong. Answer a few questions, choose coverage, and bind online without phone calls or paperwork. Every policy includes fair-rental income protection with optional add-ons for malicious damage, service lines, and equipment breakdowns. Get a tailored quote today!

FAQs about Why You Need Landlord Insurance

Do I need landlord insurance if I already have homeowners insurance?

Yes. Most insurers void homeowners' claims once the property is tenant-occupied unless you switch to a landlord or dwelling-fire policy.

Does the law require landlord insurance for rental properties?

No federal or state law mandates it, but most mortgage lenders and some property managers insist on proof of coverage.

Does landlord insurance cover appliances and furnishings?

Built-in appliances are usually covered under the dwelling limit, while movable furniture and décor you own need “landlord personal property” coverage added to the policy.