Insurance Basics
April 4, 2022

Factors that Influence the Cost of Landlord Insurance

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Steadily's blog cover page for information around landlord insurance.

Rental properties have multiple risks, including bad locations, property damages, late rental payments, and a deteriorating market economy. This is why getting a quality landlord insurance policy is essential. It covers the damage risks associated with the rental properties as specified in the policy.

However, landlord insurance may get heavy on your pocket if you don't choose your policy carefully. Several factors can increase or decrease the cost of landlord insurance policy and the premiums. 

This guide will tell you everything you need to know about the landlord insurance policy and a breakdown of factors affecting its cost.

What Does Landlord Insurance Cover?

If you're new to the housing industry, you need to first understand what a landlord insurance policy is. It actually protects landlords or homeowners who rent out their properties from damage losses. 

It covers all the elements that a home insurance policy doesn't, including the costs related to tenants. A landlord policy typically provides coverage for:

Personal Property

A landlord insurance policy covers the physical damage caused to the property due to fire, wind, or severe hail. If these weather conditions damage your appliances or other household belongings, the policy will cover them. However, it may not protect against vandalism or theft losses.

Structural Integrity 

Structural aspects of your property, such as a fence, side rails, and hallways, are also covered under the policy. 

Rental Income

If your property becomes unfit for living after damage, the landlord insurance will protect you from the loss of rental income to the maximum policy limits.

Liability Insurance

Anyone can get injured on your rental property. In such situations, a landlord insurance policy will cover the medical expenses of the injured person and your legal fees if you get sued.

Additional Coverages

Some other elements covered by the insurance policy include:

  • Trees and plants
  • Debris removal
  • Fire department service
  • Property collapse

The landlord insurance doesn't protect losses to the renter's personal belongings. The insurance only covers damages or losses to the landlords' belongings. 

Apart from that, the landlord insurance excludes some other factors, including:

  • Earthquakes
  • Erosion
  • Mudslides
  • Volcanic destruction
  • Water damage
  • War conditions
  • Asbestos removal

You would need flood insurance or homeowners' insurance to cover these elements.

Related reading: How much does landlord insurance cost?

Factors Influencing the Landlord Insurance Cost

According to the Insurance Information Institute, landlord insurance costs more than 25% of the homeowners' insurance on the same building. ValuePenguin estimates that the average cost of a homeowner's insurance policy is $1,680 per year on average. 

However, this cost can vary according to your state laws, the cost incurred to rebuild the property, and the location. The following factors typically affect the cost of landlord insurance:

Natural Disaster Risk

Properties located in high natural disaster risk areas tend to have hefty premiums. If your house is situated in any such area, you'll have to pay relatively more landlord insurance premiums. These natural disasters include hail storms, hurricanes, and fires.

So, landowners need to stay informed about their property's location vulnerability to disasters. If your region is more susceptible to these changes, you'll have to bear higher landlord insurance cost premiums.

Rental Amount

Since landlord insurance covers rental income losses, you are more likely to pay more for coverage if your monthly rental income is higher. The monthly rental costs are usually determined based on the building costs in your area. 

Therefore, if the property costs are higher, you'll be charging more rental income and paying more insurance premiums.

The Number of Rental Properties Owned

If you own multiple rental properties, you'll probably have to pay more to your landlord insurance premiums. This is because the risk of property damage or rental loss is higher in these cases.

Replacement Costs

Landlords need to inform their insurance company regarding the costs incurred in replacing items on the property. These could be changes to flooring, furnishing, cabinets, or other modifications. 

If these things are damaged to a greater extent, you may face higher replacement costs. Keep in mind that some insurance companies may also include depreciation while calculating the replacement costs.

Building Condition

If your property is in poor condition, you'll need to go for expensive landlord insurance to get it covered. Typically, older buildings are poorly maintained, but you won't have to bear higher premiums if you have properly maintained them.

Moreover, you may have to update your building's major systems, such as plumbing, sewage, electrical, air-conditioning, and elevator services.

Home Features

Your property features also impact the total cost of landlord insurance. These could be attractive hardwood floors, solid countertop material, the number of bathrooms and bedrooms, the size of the living room, etc.

Crime Rate

The location of your property matters a lot. For example, if it is situated in an area known for its increased crime rate, your premiums will automatically be higher. 

Related reading: Does landlord insurance pay for stolen property and vandalism?

Excess Coverage

The level of excess coverage you purchase also influences your landlord insurance policy. If you go for low excess coverage, you are more likely to pay more in your landlord premiums.

Proximity to a Fire Station

The closer you are to a fire station, the less you'll pay in your landlord insurance premium. This is because insurers usually consider how long it will take to extinguish an unexpected fire. 

In other words, they consider if your property's region has professional fire-fighting services or not.

Level of Protection

You can include additional coverage in your landlord policy. The higher the level of your extra protection, the more the premiums will be. Thus, it's essential to choose a landlord insurance provider that provides a reasonable quote for your coverage needs.

The good thing is that you can also get discounts on your premiums. But to avail that, you may need to research thoroughly in the market to find the best-suited insurance company for your budget.

Know More About Landlord Insurance Costs

A landlord insurance policy is essential to protect your rental property from potential damage or other risks. A homeowner's policy is a great way to ensure your personal property's interests, but it isn't as effective for rental properties as a landlord insurance policy.

If you're having trouble finding a reliable landlord insurance provider, allow Steadily to offer you a quick, affordable quote for your property.

Fill out our online form now, and we will get back to you within a business day!

This post is for informational purposes only and does not serve as legal, financial, or tax advice. Consult your own legal, financial, or tax advisor for matters mentioned here. Steadily is not liable for any actions taken based on this information. If you believe any of this information may be inaccurate please contact us.

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