Understanding the Importance of Landlord Insurance

Laura Olson
Feb 23, 2024

Owning rental properties can be a lucrative investment, but it also comes with its share of challenges and responsibilities. One of the most important aspects of being a landlord is protecting your investment through landlord insurance. In this article we'll explore why landlord insurance is essential for property owners and the peace of mind it provides.

The Benefits of Landlord Insurance

Unlike standard homeowner's insurance, landlord insurance provides specific protections tailored to the unique risks associated with rental properties.

Comprehensive Coverage: Landlord insurance offers a wide range of protections to address the unique risks associated with rental properties. Property damage coverage typically includes protection against perils such as fire, lightning, windstorm, hail, vandalism, and theft. This coverage ensures that landlords are financially protected in the event of structural damage to their property, allowing for timely repairs or reconstruction without bearing the full financial burden.

Coverage doesn't stop there though, landlord insurance can also protect against liability claims, loss of rental income, and tenant default. Without proper coverage, landlords risk significant financial losses in the event of unforeseen disasters or legal liabilities.

Financial Security: In the event of a covered peril, such as a fire or severe storm, landlord insurance ensures that landlords can quickly recover and rebuild without draining their savings or taking on significant debt. This financial protection allows landlords to maintain their investment properties' value and preserve their equity, even in the face of adversity.

Peace of Mind: Perhaps the most significant benefit of landlord insurance is the peace of mind it offers property owners. By having comprehensive insurance coverage in place, landlords can rest assured that their rental properties are protected against a wide range of risks and liabilities. This peace of mind allows landlords to focus on managing their properties, attracting and retaining tenants, and growing their investment portfolios without worrying about the potential financial consequences of unforeseen events.

What is the difference between homeowners and landlord insurance? 

The primary difference between homeowners and landlord insurance lies in their intended coverage and target audience. Homeowners insurance is designed to protect owner-occupied residences, providing coverage for both the structure of the home and personal belongings. In contrast, landlord insurance is specifically tailored for rental properties, offering protections against risks unique to rental property ownership, such as loss of rental income, tenant default, and liability claims.

You can check out this blog for more detailed information and how to determine which is best for your needs.

What influences the cost of landlord insurance coverage?

Although landlord insurance costs vary between insurers, some common factors affect your policy price:

  • The property’s geographic location, including its known risks like flooding and hurricanes
  • Size of the property
  • Age and condition of the property
  • The property’s electrical wiring condition and age
  • Available security features in the property, like a burglar alarm and smoke detectors
  • Risks covered in the policy
  • How many rental units you are insuring
  • Additional structures or outbuildings on the property

Does landlord insurance have exclusions? 

Yes, landlord insurance has some exclusions. For example, although it covers damages to the property's structure, it does not cover repairs, updates, and maintenance costs. It also excludes:

  • The tenant's personal belongings. Your tenants need to have renters insurance to cover losses against theft or damage to their personal property. It is always recommended you have this as a requirement for your tenants, provided that local and state landlord-tenant laws allow it. Some insurers will even have it as a requirement for landlord insurance.
  • Damages from earthquakes, floods, and water backups. However, you may be able to get these as additional policies in your coverage if you live in an area prone to such risks.  

Final Thoughts

The best landlord insurance is different for every real estate investor. That’s why it’s important to research and compare quotes to find the right insurance for your rental property. Choosing the best insurance policy for a rental property is about more than price. Consider coverage limits and exclusions, how customizable a policy is, and how transparent the entire process is.

If you’re looking for an easy way to protect yourself and your investment, get an instant quote from Obie today. No paper applications, week-long waits for quotes, or back and forths with brokers.