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byJessie Jordan,
Reviewed byRobbie Boddy
Some people dream of real estate investing, with grand plans of owning multiple rental properties at a time. Others may rent out a home due to necessity, whether they intend to return to the property after a few years or can’t seem to sell it in a slow market.
Regardless of how or why one becomes a landlord, though, there are a few important things to do along the way. One of them is to buy landlord insurance.
What is Landlord Insurance?
Landlord insurance is a financial product designed to protect the owner of a home while they are renting the property out to tenants. It covers the dwelling itself and select other property (such as garages and decks), offering protection if any number of perils were to occur.
You might be thinking that landlord insurance sounds a whole lot like homeowners insurance, and you’d be right. However, homeowners insurance coverage is not typically sufficient if you are renting out the home to tenants.
In some cases, you will need to switch to landlord insurance coverage or even purchase both policy types. It all depends on your individual insurer and how long you plan to rent out the property.
Landlord Insurance vs Homeowners Insurance
While there are many similarities between homeowners insurance coverage and landlord insurance, there are a few important distinctions between the two products.
The key difference is that they serve two very unique purposes. Homeowners insurance is designed to protect the home (and personal effects) of an owner who resides in the home. Landlord insurance, however, is designed to protect a home that is owned by one person but rented out by someone else (tenants).
That is because landlord insurance offers significantly more liability coverage, compared to homeowners insurance policies. This is beneficial if someone were to get hurt on your property while it is occupied by tenants — whether it be your tenants themselves, their friends and family, or passersby. In that case, you would have additional financial protection against a lawsuit.
Another difference is that landlord insurance policies can protect you from lost income. If your rental property is uninhabitable due to a covered issue — such as a fire, for example — you may be compensated for the money you’ll lose while it’s being repaired.
Which Do You Need?
Some providers will allow you to keep your standard homeowners insurance policy even if you rent the home out, especially if it is a short-term rental agreement. Others may require you to purchase landlord insurance from day one if the home is going to be occupied by tenants instead of the owner(s).
In many cases, you will need both.
Landlord Insurance vs Renters Insurance
Landlord insurance will cover the dwelling and related structures, but not the personal items inside. Renters insurance will cover a tenant’s personal possessions, but not the building itself.
For this reason, many landlords will require tenants to purchase their own renters insurance policies. That way, the dwelling is protected by the owners’ policy (or policies), and the renters’ belongings are also protected by their own coverage.
What is Covered by Landlord Insurance?
Similar tohomeowners insurance coverage, landlord insurance is intended to protect a home and its related structures from a number of perils.
With landlord insurance, the home itself is covered. Related structures are usually covered, too, such as garages, decks, sheds, and the like.
While each policy is different, you’ll usually find that coverage is provided following a variety of circ*mstances and natural disasters. These might include:
- Fire or smoke damage
- Water damage due to things like faulty pipes or appliances
- Hail/windstorms or lightning
- Vandalism or theft
- Explosions
Depending on your location and the specific policy, your landlord insurance may or may not cover damages related to
- Flooding
- Earthquakes
- Mudslide
Like homeowners policies, landlord insurance provides liability coverage to the homeowner. This liability coverage is designed to protect homeowners from lawsuits, legal fees, and other expenses due to an injury (or even death) on the property. And compared to homeowners insurance, liability coverage is typically expanded for landlord policies.
Lastly, landlord insurance may protect an owner from loss of income in certain situations. If the property is temporarily uninhabitable while repairs are made for a covered situation, the policy may pay the owner for lost rent during that time.
What is the Best Insurance for Landlords?
At the end of the day, the best landlord insurance companies are the ones that best meet your needs at a price that fits your budget.
There are a few important things to look for throughout your search. These include:
- Property coverage —Be sure to find a policy that offers to replace or repair property damage that your rental home incurs, whether due to natural disaster, vandalism/theft, appliance malfunction, and more.
- Liability protection —If someone were to be injured or killed on your rental property, you’ll want to be sure that you have adequate liability coverage. This will help protect you from medical expenses, legal fees, and more.
- Lost income coverage —If your property is uninhabitable during a covered repair, you may be able to recoup some of the rent that would have been earned during that time with lost income coverage.
By starting your landlord insurance policy search here at Gabi, you can help ensure that you not only find the policy you need but also snag the best possible price in the process.
How Much Does Landlord Insurance Cost Per Month?
You’ll find that the price of a landlord insurance policy can vary quite a bit.Premiums can be impacted by factorssuch as the coverage limits you choose, the value of your home, and even your location.
You can typically expect to pay around 20-30% more for landlord insurance than you’d pay for homeowners insurance on the same property. This is simply because a home inhabited by a tenant (i.e. someone who doesn’t have a financial investment in the property) is considered to be at a greater overall risk than one inhabited by the owner themselves.
The best way toget a lower price on your landlord insurance, however, is to adequately shop around before you buy. You can easily snag a good landlord insurance quote online with Gabi, whether you already have coverage or are looking for your first policy, by first linking your auto insurance account.Just ask your Gabi agent to add landlord insurance and they will help you!
Being a landlord is a great way to diversify financial investments and increase cash flow. However, it does involve some specific expenses, one of which is obtaining a solid insurance policy. And by utilizing Gabi in your landlord insurance policy search, you can be sure that you’re getting the best possible price on that coverage.
Landlord Insurance FAQs
Q:
Is landlord insurance more expensive than homeowners insurance?
A:
According to the Insurance Information Institute, a landlord insurance policy is usually 25% higher than a homeowners insurance policy. There are many different factors that go into each policy, so it’s always best to talk to your agent. Landlord insurance can also be tax deductible and therefore yield other benefits.
Q:
Is landlord insurance tax deductible?
A:
Yes, landlord insurance is tax deductible. This is considered a normal business expense by the IRS.
Q:
Is it illegal to not have landlord insurance?
A:
While it is technically not required by law, it is still recommended you have landlord insurance. Not only may your mortgage company require it, but you could be exposing yourself to unnecessary risk by not having it while renting out your home.
Q:
What is the average cost of landlord insurance?
A:
As with regular homeowners insurance, finding an average is tough because each premium is calculated differently. Having said that, the cost of landlord insurance is about 25% more than a homeowners insurance policy on the same home.
Editorial content on Gabi.com is reviewed by a licensed insurance agent. It is intended for informational purposes only and should not be considered legal or financial advice.
Written by
Jessie Jordan
Jessie is a Marketing Specialist at Gabi. As a licensed insurance agent, she has been helping Gabi customers buy and understand auto, home, renters, landlord, and umbrella insurance in a digestible way since she joined the Gabi team in 2020. Before joining Gabi she was a globally recognized Senior Account Executive for UPS- trusted with advising top brands on how to grow and streamline their business.
Reviewed by
Robbie Boddy
Robbie is the Vice President, Head of Sales & Customer Experience at Gabi. As a licensed insurance agent, he has more than 15 years of experience in the insurance industry, joining Gabi after working with Liberty Mutual as the Assistant Vice President and Site Leader, Direct Sales and Innovation. Robbie is a member of the Chartered Property and Casualty Underwriters society and has a Master of Business Administration (MBA) from Grand Canyon University.
