Get a quote on Business Insurance
Residential landlords may rent out a variety of properties, from large apartment complexes to single-family homes. Regardless of the scale of your rental operations, it’s crucial to ensure that you have appropriate insurance as a landlord. This coverage can provide financial protection in the event of a disaster that destroys property or a costly lawsuit.
What insurance coverage do I need as a residential landlord?
There are many types of insurance coverage to consider, but these policies are particularly relevant to residential landlords:
Landlord Insurance
As a landlord, you need to protect the value of your rental property. For landlords that rent out single-family homes or small apartment complexes with four or fewer units, landlord insurance (also known as rental dwelling insurance or rental property insurance) is a common type of policy that covers property damage to the building, lost rental income if a property is uninhabitable while repairs are completed, and liability claims.
Property: The property coverage portion of landlord insurance will cover your property if it is damaged by fire, storms, hail, and other perils. Personal property belonging to the landlord is covered, but the personal property of your tenants is not covered by landlord insurance policies. Coverage could include other structures on your rental property, such as garages or fences, but you may have to add this coverage by endorsement.
Example:
- A severe storm damages the roof and causes leaks in a house you rent out. Your rental dwelling insurance would cover repairs.
Lost rental income: If a covered peril causes severe damage to the property such that your tenants are no longer able to reside there, they may not be required to pay rent. The lost rental income coverage portion of landlord insurance will provide funds to reimburse you in this situation.
Example:
- Your duplex is struck by lightning, causing a large fire. Your tenants are unable to remain in the damaged property. Lost rental income coverage would reimburse you for the lost rent.
Liability: Landlord insurance often includes a liability coverage portion, which will provide funds for medical expenses and legal fees if you are held liable for an injury or property damage. You could be sued if faulty repairs or a lack of maintenance leads to bodily injury or property damage.
Example:
- Your rented house’s wooden deck has rotten supports and collapses, injuring your tenants. Your liability insurance would cover their medical costs and would also cover legal fees if they sue.
Commercial Property Insurance
Commercial property insurance provides funds for repairs or rebuilding if property is damaged or destroyed by a covered peril. This coverage is important for residential landlords that have property not covered by landlord insurance, typically those managing larger apartment complexes with more than four units. If a disaster affects an apartment complex you own, recovering can be costly and difficult. Commercial property insurance can provide financial support to help you replace or repair business property that is damaged by common perils, including windstorms, hail, fire, vandalism, and water damage.
Example:
- A fire breaks out in an apartment complex you own due to a fault in a heating system. Commercial property insurance would provide funds for repairs to the building.
General Liability Insurance
For larger apartment complexes, a commercial general liability policy covers incidents of third-party property damage, bodily injury, personal injury, and advertising injury. You could be held liable if someone is injured on your property, resulting in costly lawsuits. Apartment buildings and other rental properties present many hazards, particularly slip and fall risks from carpeting, stairs, sidewalks, and driveways.
You can reduce these risks by making sure your rental properties are well maintained, but there’s still a possibility that accidents may occur. General liability insurance can step in to cover medical payments, legal fees, and settlements if an incident happens.
General liability insurance also includes a personal and advertising injury component, which covers risks including libel, slander, and copyright infringement.
Example:
- Bodily injury: A prospective tenant is visiting your apartment building when he trips on a carpet that had come loose in your building’s hallway. He falls, breaking his hip. Your general liability insurance would cover the visitor’s medical bills and your legal fees if he sues.
- Personal and advertising injury: An advertisement for your new apartment complex uses a logo that is highly similar to the logo of another company in the area. The other company sues you for copyright infringement. Your general liability insurance would cover the lawsuit.
Commercial Crime Insurance
Landlords of larger rental operations may have employees who handle rent payments and other financial transactions, leading to a higher risk of crime. Commercial crime insurance provides funds to reimburse you for losses caused by theft, robbery, fraud, forgery, burglary, and other crimes. This coverage applies both to crimes committed by outside parties and crimes committed by your own employees.
Example:
- You discover that one of your employees has been making fraudulent charges for repair services but has actually been cashing the checks herself. Commercial crime insurance would cover the loss.
Business Interruption Insurance
Business interruption insurance can cover lost income and operating expenses if a covered disaster means you are unable to collect rent from tenants or continue running your business. If a major incident destroys your property and tenants are not required to pay rent while it is uninhabitable, your income would be severely reduced. Business interruption insurance coverage can step in to reimburse you for lost rental income. This coverage can also be obtained through a rental value coverage form.
Example:
- A tornado destroys your property and tenants are no longer able to live at the premises or pay rent. Your business interruption insurance would cover the lost income.
Workers’ Compensation Insurance
If you hire employees, workers’ compensation insurance is a key coverage that is required in almost all states. Employees of landlords may perform physically demanding janitorial or maintenance tasks, which could lead to back strain, slips and falls, and other injuries. Workers’ compensation insurance covers employees’ medical expenses and lost income if they suffer an occupational injury or disease. Workers’ comp also provides financial benefits for an employee’s dependents in the case of a work-related employee death.
Example:
- One of your janitorial staff injures his back after lifting a heavy crate of cleaning supplies. Your workers’ compensation insurance would cover his medical fees and a portion of his lost income while he is unable to work.
Commercial Auto Insurance
If your business owns or leases vehicles or if your employees use their own personal vehicles for business purposes, commercial auto insurance is a key coverage that is legally required in most states. If your employees are involved in a car crash, commercial auto insurance can provide coverage for physical damage to vehicles, third-party bodily injury, and property damage. Commercial auto insurance can also provide coverage for damage to your vehicles caused by covered perils, including theft, falling objects, fire, and more.
Example:
- One of your employees is driving to your rental unit to do a walkthrough after a tenant vacated the premises. While making a right turn, she fails to notice a pedestrian in the crosswalk and knocks the pedestrian down. The pedestrian breaks her arm and requires medical attention. Commercial auto insurance would cover the pedestrian’s medical bills.
Additional Coverages
- A business owner’s policy bundles general liability, property, business income, and extra expense coverage into one package. For small businesses that fit certain requirements based on the number of apartments and height of the building, this type of policy could help you obtain a wide range of coverage while paying less in premiums than you would if you bought each policy individually.
- Errors and omissions insurance is can protect your business in the case you are hit with lawsuits alleging negligence or failures in your professional work. As a residential landlord, tenants could sue you if they feel that a property was misrepresented to them or mistakes were made in a lease.
- Inland marine insurance provides financial protection for your business property that does not remain at a fixed location. This may be necessary if you own tools and equipment used in maintaining your properties, such as lawnmowers or carpet cleaning machines.
Pricing and Quotes
Pricing for business insurance will vary based on the type of insurance coverage and the risk profile of your business. Insurers consider factors such as:
- Business size
- Industry
- Location
- Number of employees
- Claims history
Businesses with higher risks will have higher premiums than those deemed lower risk. For example, a landlord with a history of frequent claims will face higher premiums. Premiums also rise as you increase the limits of insurance. Different insurance companies have different models for rating risks, so it is worth comparing pricing across different insurers.
In order to get an accurate estimate on pricing, it’s best to get a quote from a reputable insurance company. Below we’ve highlighted a few of our trusted partners who offer coverage for residential landlords:
| Provider | General Liability | Professional Liability | Business Owner's Policy |
|---|---|---|---|
| Embroker | ?? | ?? | ?? |
| CoverageSmith | ?? | ?? | ?? |
| CoverWallet | ?? | ?? | ?? |
| Hiscox | ?? | ?? | ?? |
| Thimble | ?? | ?? | ?? |
Final Word
When you own residential rental property, it’s important to protect yourself from a number of significant risks. As a landlord, you could be held liable for bodily injury or property damage that takes place on your property. In addition, damage to rental property from fires, windstorms, and other perils is common and it can be extremely costly to repair or rebuild the property. With the right insurance policies, you can rest assured that you will be financially protected in the event of any disasters or accidents.
