What Claims Are Covered & Not Covered by Landlord Insurance

What does landlord insurance cover?

Landlord insurance covers damage to the building and gives liability protection if the landlord is sued. It excludes maintenance and equipment breakdowns and damage to a tenant's personal possessions. People who own properties and rent them out should consider landlord insurance. Most landlord insurance policy covers a range of perils such as

  • Fire and smoke
  • Windstorm or hail
  • Falling objects
  • Water damage

The main goal of landlord policies is to protect the property owner from financial loss. They have two key parts: property insurance and liability insurance protection.

1. Property Insurance Protection

Your landlord insurance policy will cover loss or damages to your building, but it also protects your financial interests in the property. A standard landlord insurance policy includes:

  • Dwelling coverage (building coverage). Pays to repair your rental if fire, lightning, wind, or other covered losses damage the property. Covered losses are also called covered perils, and the policy will say precisely what's taken care of and what's excluded.
  • Other structures. Covers the cost to fix detached structures at the residence such as a fence or detached garage if a covered loss causes damage.
  • Loss of rent (rental reimbursement). Compensates the landlord for loss of rental income for a set period if a covered peril forces the renters to move temporarily.
  • Rental Personal Property. Protects property left to service the rental, such as appliances or a lawnmower. It provides no coverage for the renter's property, and your homeowner's policy covers your non-rental related personal property.

2. Liability Insurance Protection

Landlord liability insurance helps protect against legal or medical costs. The liability insurance part of a rental property policy helps pay for a guest or tenant's medical bills if they're injured on your property, and you're held responsible. This coverage will also help pay for your legal expenses if the guest or tenant comes after you for damages.

For example, say someone trips going down the stairs in a building and sues the landlord. A court might hold the landlord responsible for the tenant's medical and legal costs if the stairwell lights were burned out. Here, the landlord's liability coverage steps in to pay for the landlord's legal fees and settlements or judgments.

Additional Landlord Insurance Coverage

Depending on the property's neighborhood and condition, you may think about optional coverages such as protection for vandalism or burglary. For properties under construction or being renovated, you can get additional coverage to protect the building until it's occupied and cover the extra costs of following building codes. (Note: if you are a homeowner and not a landlord, this is known as a Dwelling Under Construction Endorsement)

For example: If there's a break-in and your property needs repairs, your landlord insurance policy will cover the cost if you've added the coverage. However, the type of insurance policy you have will determine if you receive the actual cash value (ACV) of the damaged property or replacement cost (RC). ACV considers depreciation, and RC would pay for you to get something similar today.  

What does landlord insurance not cover?

Individual policies offer different types of coverage, but here are a few common items that a landlord insurance policy will not cover:

  • Maintenance and Equipment Breakdowns: If the dishwasher system on your property breaks down, you will need to pay out of pocket to repair the equipment.
  • Flood Damage: Landlord Insurance does not include coverage for any damage relating to floods. To protect against this natural disaster, you must buy separate flood insurance from an insurance provider.
  • Residences The Property Owner Occupies: Unlike homeowners insurance, landlord insurance will typically not cover a property if you live in it, even if you rent out a room or a unit to a tenant. Insurers designed landlord policies specifically for "non-owner-occupied" properties. A homeowners insurance policy, however, will not cover damages caused by a tenant.
  • Tenant's Personal Belongings: If your tenant's personal property is damaged, your landlord insurance policy will not cover the replacement costs for their items. Your tenants will need to get a renters insurance policy for protection.

The last two points raise three quick questions for many people.

What's the difference between landlord and homeowners insurance?

Landlord and homeowners have similar coverage, but they're designed for different policyholders. Landlord insurance protects properties that house long-term tenants, those who stay longer than 30 days.

Short-term rentals for an Airbnb or VRBO business would need a commercial, homeshare, or vacation rental policy. Landlord insurance usually has little personal property coverage, and the liability protection only deals with bodily injury or property damage claims that relate to the rental.

A standard homeowners insurance policy would only apply to your primary residence. The liability applies to both you and your immediate family, and the personal property protection gives a higher amount of coverage and is more comprehensive.

Should I require tenants to have renters insurance?

Many landlords require their tenants to buy renters insurance because it reduces several headaches and problems. Here are three reasons you may think of putting it in your lease:

  • Tenants' Belongings. If a fire or other loss damages your renters' stuff, they won't need to sue you to replace their belongings.
  • Tenants' Guests. If a guest sustains an injury, the tenants' policy may apply, meaning you don't have to file a claim.
  • Tenants' Longevity. If you want to keep the renters after a loss that causes a relocation, renters insurance pays for your tenants' added expenses while they temporarily move out.  If the move doesn’t cause a major financial crisis for the renter, they’re more likely to return and continue paying rent after the repairs.

Does landlord insurance cover tenant damage?

It depends. Insurers categorize tenant damage in three ways:

  • Accidental Damage. Anything the renter accidentally does that causes a covered loss, such as breaking a window. Policies generally cover accidents; however, companies may handle it differently.
  • Intentional Damage. Insurers may label this type of damage as "malicious damage." If a tenant takes a baseball to your walls, the coverage will depend on the terms of your policy.
  • Wear and Tear. This kind of damage is excluded, but that doesn't mean you can't charge a hefty security deposit to take care of these incidentals.

Now that you know all about what landlord insurance covers, you might ponder the bottom-line.

How much does landlord insurance cost?

You can expect your landlord insurance quote to be 25% more than a homeowners policy, according to the Insurance Information Institute. Insurance companies charge more because statistics prove renters are more likely to cause damage that results in a claim than homeowners. The average cost of landlord insurance was $1,478 in annual premium, and the average cost of homeowners insurance was $1,192, as of a few years back.

Ready to save, get the coverage you need and avoid unnecessary additional costs?  Talk to one of our insurance agents today.

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