How Much Does Landlord Insurance Cost?

Laura Olson
Feb 15, 2024

Real estate investors spend a lot of time, money, and effort finding the right rental property, screening tenants, and taking care of and making upgrades to the property to maximize return on investment.

A key part of owning rental property is having the right landlord insurance coverage to help protect your valuable investment.

However, it can be challenging to find the right policy coverage at the best price, especially given the number of insurance carriers there are to choose from. Similar to a typical homeowners policy, landlord insurance for rental property comes in all shapes and sizes, with different pay-out options and types of coverage.

This article sheds more light on how much landlord insurance costs, the factors affecting the annual premium for landlord insurance, and the different coverage options available. Let’s begin by discussing the three main risk categories covered by landlord insurance.

What Does Landlord Insurance Cover?

A landlord policy covers three main categories of risk.

1. Property Damage: Covers damages to the property's structure caused by natural disasters, vandalism, or intentional damage caused by a tenant due to negligence or during an eviction.

2. General Liability: Claims a landlord may face from injuries to a tenant, a tenant’s guest, or a neighbor. As a rule of thumb, covered costs can include medical expenses, legal fees, costs to settle a lawsuit, and funeral costs.

3. Loss of Income: One of the main reasons investors purchase rental property is for the recurring income stream. But sometimes, things like natural disasters can leave the property uninhabitable. Landlord insurance may reimburse a landlord for lost income when the property is being repaired, and a new tenant is located.

Additionally, you could add extra coverage or riders to your policy to cover claims arising from flooding, water backup, natural disasters, personal items used in a rental property – such as furniture and appliances owned by the landlord – and more.

Landlord Insurance vs. Homeowners Insurance

A common question that many beginning real estate investors have is whether landlord insurance is really necessary when a homeowners insurance policy is already in place.

The answer is yes because the property is rented to somebody else instead of being used as the primary residence for the owner. If a homeowners insurance claim is made on a property that is really being used as a rental there’s the very real risk that coverage may be denied when the claims adjuster discovers the home is renter-occupied.

Although the two types of insurance coverage have many things in common, there are several items landlord insurance covers that homeowners insurance does not:

  • Being sued for physical injuries, mental duress, or even death by a party claiming a landlord was negligent or failed to keep the home safe and habitable
  • Vandalism, theft, and malicious damages caused by tenants or guests, such as stealing copper wire from the electrical system, pouring quick-drying cement down a drain, or stealing hardware and plumbing fixtures
  • Loss of rental income if a property temporarily becomes uninhabitable due to a covered loss such as major mold remediation, a fire, or flooding caused by a broken pipe or rainstorm

How Much Does Landlord Insurance Cost?

As a rule of thumb, landlord insurance typically runs higher than a standard homeowners insurance policy. However, insurance for rental property can vary quite a bit (from $800 to $3,000 per year for a 3 bed/2 bath single-family rental, depending on the state), simply because every home is unique and every landlord has different coverage needs.

An excellent way to get a free instant quote online for landlord insurance is with Obie.

Obie offers instant insurance specifically built for landlords and real estate investors. Landlord insurance through Obie is available in all 50 states, and investors have insured more than $4 billion in property to date.

When shopping around for a landlord insurance quote, there are several factors insurers consider when calculating a premium, including:

  • Type of rental property, such as a single-family rental, small multifamily property, larger apartment building, condominium unit, or short-term rental
  • Neighborhood of the area the rental property is located, taking into consideration important criteria such as median home values, income levels, employment rates, and school district quality.
  • Physical characteristics of the rental property including square footage and lot size, number of bedrooms and bathrooms, elevation and number of floors, outbuildings such as a freestanding garage or guest house, and renovated basement or attic
  • Type of construction materials used in the home, original build date, and recent updates done such as a new roof, energy-friendly features such as double-paned windows, or a newer heating and cooling system
  • Location of a home within the neighborhood and proximity to a hydrant or fire station, and the estimated amount of time it would take to extinguish a fire in the unfortunate event that one occurred
  • Area of the county the rental property is located in, and whether the region is typically subject to natural disasters such as coastal flooding, hurricanes or tornadoes, or snow and ice storms

It is important to remember that the more comprehensive you need your landlord insurance to be, the pricier it will get. Therefore, it is crucial to go through the provided policy to ensure it covers the risks your property faces.

Some companies compete on price by giving you minimal coverage that might save you a few dollars upfront but may cost you dearly when and if a claim occurs.

Benefits of a Landlord Insurance Policy

Buying a landlord insurance policy might seem complicated, given the wide variety of coverage options available. However, purchasing insurance written explicitly for a rental property is necessary for investing in real estate.

A landlord insurance policy will help shield you against risks that could cost you a lot of money to repair damages on the property's structure and legal fees for claims against you.

For example, let's say your tenant or a guest is injured at your property and decides to file a claim against you. This could include their medical costs, settlement fees, legal costs,  loss of income for missed work, and mental duress.

Without the right landlord insurance coverage, you might have to pay for these claims from your hard-earned savings. Fortunately, a comprehensive landlord insurance policy with liability coverage will take care of these costs and save you from the possibility of losing your investment when faced with such incidents.

That's just one example. A landlord insurance policy also protects against burglary, vandalism, theft by tenants, damages arising from natural disasters, and loss of rental income. So you can rest easy and run your business knowing your investment is insured against a myriad of risks.

Tips for Buying Landlord Insurance

As you can see, buying landlord insurance requires some time and energy. But here are a few tips to help you ease the process of choosing the best insurer:

Understand the Different Categories

There are three landlord insurance categories, often referred to as dwelling policies (DP). You will see insurers showing packages under DP-1, DP-2, and DP-3. DP-1 are often offered at a low rate due to often excluding general liability, leaving gaps in policy coverage. DP-2 is more comprehensive and could extend to damages from natural disasters, while DP-3 is the most comprehensive and pricier. DP-3 covers every peril unless otherwise stated. Ensure you are aware of what risks your preferred category covers and excludes.

Make Comparisons

Do not settle for the first insurance company you stumble upon while researching. Get quotes from different insurers and compare the premiums and coverage. One insurer might have a pricier premium but provide you with more value that helps mitigate most of the risks. The end goal is to have an affordable policy covering as many risks as possible.

You can take the time to call several companies, or have Obie provide a quote from the many carriers they work with.

Have a Professional Agent

They say that the 'devil is in the details,” so it's essential to work with an insurance broker that specializes in providing insurance for landlords and rental property investors.

Any type of insurance can be tricky to understand because there is a lot of detail. Somewhere among all the industry jargon, many landlords misunderstand some of the terms and conditions and basic descriptions of their policy, only to realize later that they have made a mistake. The best landlord insurance broker will work hard to match you with the right insurance for your rental that best meets your needs.

Require Tenants to Take Out a Renters Insurance Policy

Depending on the landlord-tenant laws where a rental property is located, a landlord may be able to require a tenant to obtain a renters insurance policy before moving in.

Sometimes known as tenant insurance, renters insurance is paid for by a tenant. It provides coverage for loss of personal property, liability for damage caused or a guest's injuries, and additional living expenses such as a hotel bill if a rental property becomes temporarily uninhabitable due to damage.

Final Thoughts

Having landlord insurance is an essential part of owning and operating rental property. While there are countless companies that offer insurance, very few specialize in insuring landlords. The best landlord insurance company will help you find the right policy for your specific needs, with affordable transparent coverage and customized pricing plans to help reduce risk and protect you from the unexpected.