Honorable Mentions
For landlords looking for bundling options, we also recommend The Hartford’s and American Family’s landlord insurance. The Hartford lets customers add landlord insurance to their existing homeowner insurance.
Meanwhile, American Family’s landlord insurance can be combined with a commercial liability umbrella policy, business owner policy, business auto insurance, and life insurance policy. Unfortunately, American Family is only available in 19 states.
Helpful Information About Landlord Insurance
Landlord Insurance 101
Property insurance is a protection against financial property loss. It offers protection against “named perils”—types of situations that are covered against damage.
What is landlord insurance?
Landlord insurance is, as the name suggests, insurance protection for landlords. It can often go by other names, including “dwelling property,” “rental dwelling,” “rental property.” The policy document can fall into one of three categories: DP1, DP2, DP3, each offering increasingly more comprehensive coverage.
There are three main types of coverage that landlords should expect in their policies:
Building and property coverage:This coverage typically includes protection against named perils like fire, windstorm, smoke, snow, and water damage.
Liability:This coverage protects landlords against a lawsuit from anyone claiming to have gotten injured on the landlord’s property. As Lynne McChristian, from iii.org, told us, “It’s important to remember that we live in a litigious society. Landlords need to seek protection for that; it’s the cost of doing business.”
Janet Portman from Nolo.com also highlighted the importance of liability coverage by painting us the following picture: “Let’s say that you’re a fairly reasonable, secure landlord. You make sure everything is up to code and you screen your tenants. And then a renter, one of their guests, a delivery person, or even the UPS guy, slips on the front stairs. And then they call you saying “I was hurt at your property because this wasn’t properly maintained. Who is your insurance company? I want to file a claim.”
Liability coverage protects landlords from having to pay for lawsuits out of pocket.
Loss of Rental Income: If the property becomes uninhabitable due to damage from one of the named perils, the landlord will not be able to rent it out, and they will, therefore, lose the income expected from the rental property. This coverage is often an extra add-on, but it’s highly recommended that landlords include it in their policy package. Note, however, that it does not cover loss of rental income if the tenant defaults on their rent. There are separate “rent rescue” or “rent guarantee” insurance policies that can be purchased with external insurers.
How is it different from homeowners insurance?
This is a common question asked by homeowners who are renting a room or section of their home out to a tenant, or who have inherited a property that previously had homeowners insurance. The question is usually followed up by “why is landlord insurance more expensive than homeowners?”
Lynne McChristian, of the Insurance Information Institute, explained that: “Homeowners insurance is for the resident. If you rent out a room in your home and you live in your home as your primary residence, then that might make a difference and homeowners insurance might cover that. But it might not be the correct level of protection.” She then added that insurers see renters as a higher risk. “When you own property that you don’t live in, it becomes a commercial business, and it requires different coverage. It’s more expensive than homeowners because you don’t have someone who has the same level of vested interest in the property that a homeowner would have.”
When we interviewed Janet Portman, residential and commercial landlord/tenant law and former public defender, she echoed McChristian’s explanation and further warned that: “Trying to cover your renter with a homeowners insurance policy is risky because, if there’s a loss and you file a claim, the company will investigate it. When they find out you had a tenant, you will not be covered, and all the money you paid in premiums will be for nothing.”
The bottom line is: landlords are only covered by homeowners insurance if they’re living in the same property as the tenant, and even then, it’s important to confirm that the insurer will not void the policy for such an arrangement.
Understanding Risk and Its Effect on Premiums
The higher the risk, the higher the premiums. Because insurance is about managing risk, the more risks that have to be accounted for, the riskier it is for the insurer, therefore the higher the premiums become for the customer.
 Premiums go up and down depending on what brings up risk and what brings it down. | |
| RAISES RISK = HIGHER PREMIUMS | LOWERS RISK = LOWER PREMIUMS |
|---|---|
 Larger size of the property and number of rental units being insured |  Smaller size of the property and number of rental units being insured |
 Older age and poorer condition of the property |  Newer age and better condition of the property |
 Crime or natural disaster-heavy geographic location of the property |  Lack of crime or natural disaster-heavy geographic location of the property |
 The presence of a swimming pool, hot tub or another high-risk feature |  No swimming pool, hot tub or another high-risk features |
 The type of guest staying in the rental property (short visitor) |  The type of guest staying in the rental property (long-term visitor) |
 Lack of security features installed on the premises, like smart alarms, locks and cameras |  Security features installed on the premises, like smart alarms, locks and cameras |
Janet Portman gave us the following example of why rental properties are considered riskier:
“Homeowners insurance is less risky than landlord insurance because, from the company’s perspective, they have more assurances that risks will be minimized. Homeowners are more likely to notice a problem and be invested in fixing it. This can be proven through the homeowner’s claims history. However, risk is multiplied when you have tenants. The insurance company doesn’t know anything about the renter’s history, so they are taking on a higher risk.”
Thus, the premiums must also be higher.
Why you can’t afford not to have landlord insurance
“Are you willing to gamble on losing everything? It’s foolish not to have insurance.” - Janet Portman, executive editor at Nolo.com
 Breakdown of Common Landlord Claim Costs | |
| TYPE OF DAMAGE | AVERAGE CLAIM COSTS |
|---|---|
 WATER DAMAGE | $8,150 |
 THEFT/BURGLARY | $2,673 |
 WIND | $4,339 |
 FIRE | $74,963 |
 PHYSICAL DAMAGE | $4,190 |
 LIABILITY | $14,722 |
 HAIL | $5,774 |
 MYSTERIOUS DISAPPEARANCE | $7,506 |
 FREEZING WATER | $3,762 |
What to Watch Out for When Buying Landlord Insurance
Doing it alone versus using a broker
“Having a conversation with a trusted insurance representative is important because it helps you understand your vulnerabilities.” - Lynne McChristian, from the Insurance Information Institute
This advice was also echoed by Janet Portman, the executive editor at Nolo.com. While many casual and accidental landlords who are managing a property they inherited or originally bought for another purpose might want to save a few dollars by tackling landlord insurance on their own, it’s always a good idea to consult with an expert. “Find an independent broker to advise you. They don’t have ties to a specific company, so they won’t have a vested interest in selling you a policy from only that company,” Portman advised.
A broker can further help landlords identify the amount of coverage they need, the risks pertinent to their area, and which exclusions would be detrimental to them.
Consider getting replacement value instead of actual cash
One of the things that can lower premiums is having an “actual cash value” (ACV) policy. ACV takes depreciation into account when determining how much the insured should receive for damaged property. That means that although something might have cost $1,000 originally, the policyholder will only receive an equivalent of what the item is worth now, which can be a significantly smaller amount.
That’s problematic for landlords who need to replace damaged property to the same original standard of quality or even to the current, more modern standard of quality. In order to ensure that damaged property can be successfully replaced without incurring unnecessary costs, it’s better to choose “replacement cost” coverage. The premiums will be higher, but so will the peace of mind.
Remember the add-ons
When it comes to add-ons, endorsem*nts, floaters, and riders, there’s no one-size-fits-all policy. Landlords typically need extra coverage for loss of rental income, electronic equipment, water-back up, and vandalism, among others. Of course, the type of add-ons a landlord needs depends entirely on their particular situation, the age and size of the property, the geographic location, the number of units, and the risks to which the property is vulnerable.
A particular add-on that landlords might consider looking into is an umbrella coverage. Umbrella coverage protects landlords from bigger liability claims after the standard insurance meets its maximum payoff.
Natural disaster coverage is usually extra or separate policies
The effects of natural disasters, such as flooding or water seepage as a result of a storm or hurricane, are seldom covered in standard landlord insurance. It’s important when comparison shopping to identify whether a company offers flood coverage through another insurer like the National Flood Insurance Program, or whether they offer no such connection, forcing the landlord to purchase their own flood insurance separately.
Bottomline: landlords should identify the vulnerabilities of their property based on their geographic location. These can also include areas prone to earthquakes and forest fires, which are sometimes not covered under some policies.
Don’t forget the exclusions
Exclusions are something to watch out for particularly with DP-3 policies. These comprehensive policies are for “all perils,” but conversely, they have exclusions—specific perils that are not covered by the policy. These often include riots or certain types of vandalism, water damage from floods, lead-based paint claims, mold damage, “acts of god,” and even war or nuclear events.
Experts advise that landlords consult with their insurance agent to know whether they actually do need coverage, and therefore additional or external insurance, for perils in the exclusions.
Be Aware of What Can Void a Policy
A common mistake made by many policyholders is thinking that once they have purchased a policy, they are guaranteed coverage. However, there are many things that can void a policy if the insurance company considers the landlord to be in breach of the contract.
Common causes can include poor maintenance of the property, failing to report major changes to the insurer (such as making renovations or additions to the property), and filing too many claims. Practices that help reduce policy cancellations or rejected claims include keeping up-to-date documentation on the property, keeping the insurer aware of any relevant events that happen such as damages, accidents, break-ins, and filing a police report as soon as an incident requiring it happens.
Watching out for your tenants
While landlord insurance protects the landlord’s belongings—the physical building and any appliances and furniture within it—it does not protect the tenant’s belongings. This is why experts unanimously recommend that landlords encourage their tenants to get renters insurance as well. Renters insurance includes coverage for personal belongings, liability, additional living expenses, and medical payments to others. If a guest is injured in a rental property covered by renters insurance, landlords can rest easy knowing that there are extra levels of protection.
In addition, it’s also recommended that landlords be aware of the rental assistance program offered by the Department of Housing and Urban Development (HUD) designed to help low-income renters.
