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What to Look for in a Good Landlord Insurance Policy

Laura Olson
Aug 23, 2023

Reading through a landlord insurance policy to figure out whether you have appropriate coverage is tricky, especially if you’re a new rental property owner.

Which areas of your property have coverage? Are you protected if someone gets hurt on your property? Does your landlord insurance cover the cost of tenant damage or theft? 

This comprehensive guide will demystify the insurance landscape by exploring the top 10 elements to look for in a policy. With these essential tips, you'll be well-prepared to find the best landlord insurance policy that protects both you and your rental properties.

1. Property Coverage

When selecting a landlord insurance policy, look beyond basic coverage and consider the following:

  • Extent of Coverage: Confirm your policy covers the main building and any attached or detached structures, such as garages, sheds, or fences. Find out if it covers your personal property within the rental, such as furnishings or appliances. 
  • Covered Perils: Understand the specific perils included in your policy, such as fire, storms, vandalism, water damage, and more. Know what events are covered and if any exclusions apply.
  • Replacement Cost vs. Actual Cash Value: Replacement cost coverage pays the entire expense of repairing or rebuilding your property, while actual cash value coverage takes depreciation into account. Determine which option best suits your needs and financial situation.

2. Loss of Rental Income

One of your primary concerns as a landlord is a steady flow of rental income to cover your expenses and provide a return on your investment. Loss of rental income coverage offers financial protection if your dwelling becomes temporarily uninhabitable due to a covered event, including:

  • Fire or smoke damage
  • Water damage from burst pipes or flooding
  • Storm damage from perils like hurricanes or tornadoes
  • Structural damage that requires significant repairs

To ensure you're adequately protected, be sure your coverage limits are sufficient for your specific needs. Consider factors such as your rental income, the estimated time to repair or rebuild your property, and any additional expenses you might incur, like temporary housing for displaced tenants.

3. Liability Coverage

Liability coverage protects you should a renter or visitor sustain bodily injury or property damage on your property and try to hold you accountable. You can be held liable for common accidents on a rental property, such as slips and falls, injuries from poorly maintained structures, or harm from faulty electrical systems or appliances.

Having adequate coverage for legal expenses in your policy alleviates the financial burden of legal disputes. When selecting a policy, ensure it has enough liability protection to shield you from potential lawsuits and medical expenses. Generally, opting for $1 million in coverage provides a reasonable safety net in case of unforeseen incidents.

4. Tenant Damage and Theft

Tenant-caused damage and theft are two unfortunate realities landlords may encounter while renting their properties. Standard property coverage typically protects your property from various perils, though it may not cover damages caused intentionally or unintentionally by renters. 

This coverage is intended to address accidental, tenant-inflicted damage or theft, and  can help safeguard your investment. If you rent to individuals with pets like cats and dogs, this protection can assist with animal-caused damage not covered by your pet fee or the renters’ policy. Similarly, theft coverage can give you peace of mind if your property has valuable fixtures and fittings.

Repairman screwing an electrical box into the side of a house

6. Additional Endorsements

Standard landlord policies offer comprehensive protection for your rental property, but unique circumstances or risks exist, requiring additional coverage. Consider adding endorsements or riders in these instances to help address any gaps in your policy.

For instance, if your rental property is in an area prone to natural disasters, such as earthquakes or floods, you might want earthquake or flood insurance. This coverage is typically excluded from standard policies. 

Another example might be adding coverage for mold and mildew damage if your property is in a humid climate or has a history of moisture or flooding issues.

You can search the Obie risk map to learn about the natural risks in your area and be prepared with the right insurance for your rental property. 

Obie Interactive Risk Map

By assessing your property's unique risks and working with your insurance broker to customize your policy with appropriate endorsements, you can ensure your investment has all the protection it needs.

7. Deductibles and Premiums

A deductible is the out-of-pocket amount you agree to pay before your insurance coverage kicks in for a covered loss. A premium is the monthly or annual amount you pay for the policy. 

There's an inverse relationship between these two factors: a higher deductible often results in a lower premium, and vice versa.

To strike the right balance between affordability and adequate coverage, carefully consider both amounts. While a higher deductible can lower your premium, you'll also be responsible for covering a larger portion of any potential losses. 

When evaluating landlord insurance premiums, avoid sacrificing essential coverage to save money. Weigh both the deductible and premium against your financial situation and risk tolerance to secure sufficient protection for your rental property without breaking the bank.

8. Insurance Company Reputation

A reputable insurance carrier will provide the coverage you need and offer reliable support and assistance when you most need it – when there is a claim. To make an informed decision, take the time to research potential insurance providers and gather information about their track records in the industry.

One effective way to evaluate an insurance company's reputation is by reading customer reviews and testimonials. These reviews can shed light on various aspects of the company's performance, such as responsiveness, fairness in handling claims, and overall customer satisfaction. You can also look at popular investor forums like BiggerPockets to learn about others’ experiences with the provider.

Finding the Right Insurance with Obie

One of the best ways to see if a provider is right for you is to get a quote and see what they can offer for your specific property. When obtaining a quote, it’s important to provide as much information as possible about your property, such as its location, age, size, occupancy status, features, and any specific risks or exposures. You'll also want to make sure you are asking each provider the right questions about their offering. This will help insurers accurately assess your risk profile and put together a suitable policy customized to your unique needs.

Obie offers an easy-to-use online quote system that will give you a customized quote for your property in minutes. Landlords have insured more than $4 Billion in property with Obie, making us a simple and complete solution for tailored coverage and peace of mind. To see what we can offer you, get started with a quote today.