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Landlord Insurance

Landlord Insurance

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As a landlord, you face the risk that unexpected disasters such as fires or storms could damage your property. In addition, you could be sued with allegations that tenants or their visitors were injured as a result of negligence. Landlord Insurance can step in to protect the value of your rental property and cover any liability claims that arise.

What is Landlord Insurance?

Landlord Insurance (also known as rental dwelling insurance or rental property insurance) is a common type of policy for landlords that typically covers property damage to residential buildings, lost rental income if a property is uninhabitable while repairs are completed, and liability claims.


Who needs Landlord Insurance?

Landlord Insurance is necessary for property owners who rent out one or more single-family homes or small apartment complexes with four or fewer units. Landlord Insurance is not designed for large apartment properties. Landlords who rent out large apartment complexes with more than four units will likely need to secure property and liability coverage with separate commercial property and general liability policies or a business owner’s policy

For those offering short-term rentals, it’s important to note that Landlord Insurance is designed for long-term rentals and is not typically suitable if you are renting out your property on a short-term basis. 

If you rent out part or all of your home on a regular basis—for example, if you operate an Airbnb—you would need a hotel or bed and breakfast policy to provide coverage. 

If you occasionally rent out part or all of your primary residence on a temporary basis, some homeowners policies will provide coverage. Other homeowners policies will require you to add an endorsement to cover this scenario. 

What does Landlord Insurance cover?

Landlord Insurance policies can vary depending on the insurer, but they typically offer coverage for these areas: 

Property Damage

If your rental property is damaged by fire, storms, hail, or other perils, Landlord Insurance will provide funds for repairs or replacements. Personal property belonging to the landlord can also be covered, but it’s important to note that the personal property of your tenants is not covered by Landlord Insurance policies. Coverage could also include other structures on your rental property, such as garages or fences, but you may have to add this coverage by endorsement.


Lost Rental Income

In some cases, property damage may be so severe that tenants must vacate the premises. In this situation, they would likely no longer be required to pay rent. If your tenants are unable to reside at your property due to damage from a covered peril, the lost rental income coverage portion of landlord insurance will provide funds to reimburse you for lost income. 


Liability Claims

Landlord Insurance frequently includes liability coverage. This will provide funds for medical expenses and legal fees if you are held liable for an injury or property damage that occurs on your property. Faulty repairs or a lack of maintenance could cause your tenants to suffer damage to their property or bodily injury. Even if the injury or damage was not your fault, tenants could believe you were negligent and sue you. The liability portion of Landlord Insurance can provide coverage in these situations.


DP1, DP2, and DP3 Coverage

Landlord Insurance policies often come in three typical forms: DP1 (Basic), DP2 (Broad), and DP3 (Special). DP forms, often called dwelling fire forms, represent different levels of coverage, and the specifics of each level may differ by insurer. Most landlords choose DP3 policies because they offer the broadest coverage. 

Additional Endorsements

There are a variety of endorsements available to add to your Landlord Insurance policy. Some common endorsements include: 

Non-Occupied Dwelling Coverage

Many Landlord Insurance policies exclude coverage for properties that have been unoccupied for more than 30 or 60 days. Since rental homes may be unoccupied for a time while you find new tenants, non-occupied dwelling coverage can be useful. This would extend coverage to include the time the property was unoccupied. 

Rental Property Under Construction Coverage

If you are building a new property or renovating an existing building, you can purchase rental property under construction coverage to protect your building while construction is ongoing. 

Building Code Coverage 

If local building codes change and you are planning to repair or upgrade your property, you may also be required to renovate your property to meet the new requirements. Landlord Insurance would not ordinarily cover these costs. A building code coverage endorsement can add coverage to pay for the costs of updating your property to meet building codes. 

Theft Coverage

Landlord policies typically do not include coverage for theft or burglary. For rental properties that are not occupied by the owner, a limited theft coverage endorsement is available. This does not cover your tenants’ property, but it does provide coverage for damage caused by burglary and for items belonging to you, such as appliances, furnishings if you rent out a furnished dwelling, and other items that you may keep on the property, such as lawnmowers. 

Vandalism Coverage

A vandalism endorsement will add coverage for damages caused by vandalism, which is excluded from most standard Landlord Insurance policies.

What is excluded by Landlord Insurance?

There are a number of common exclusions to Landlord Insurance. These include: 

Do you need both Landlord Insurance and homeowners insurance?

No, you would only need one of these policies for the same property. Homeowners insurance is intended to cover properties that are occupied by the owners—it does not cover properties that are rented out to others. If you rent out your property and do not reside in the property, Landlord Insurance can provide coverage. 

For homeowners who rent out part or all of their primary residence on an infrequent basis—for example, for a few holidays a year—homeowners insurance can provide coverage. Some insurers may require you to add an endorsement onto your homeowners policy to ensure that you are properly covered. 

Is Landlord Insurance tax deductible?

Yes, Landlord Insurance premiums are tax deductible. Insurance costs for your rental property are considered a business expense. Other insurance policies you might purchase for rental properties, such as flood insurance, are also tax deductible. 

Final Word 

As a landlord, it’s crucial that you protect your property from unexpected catastrophes. If your property is damaged, you would have to pay for repairs and may also lose rental income if the home is no longer habitable. In addition, there’s a possibility that tenants could sue you if they believe an injury or damage to their property was caused by negligence on your part. Landlord Insurance will provide financial protection for these common risks faced by landlords.

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