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If you own one or more properties that you rent out, you likely need rental property insurance.
Here’s what rental property insurance is, what it covers, and whether or not you might need it.
What is rental property insurance?
Rental property insurance, also known as landlord insurance, covers the risks associated with renting your property (house, apartment, condo, etc.) to others. It can provide financial protection in the event that your property is damaged, or someone is injured on your property.
Depending on the policy you purchase, rental property insurance can also protect your income from the rental property if the property becomes uninhabitable due to a problem listed on your policy.
If you’re considering renting your property, it’s important to check to see what, if any, coverage is available from your existing homeowners insurance.
What does rental property insurance cover?
Rental property insurance often includes the following coverage.
Covering the apartment
This covers physical damage to the building caused by problems listed on your policy, such as wind, fire and hail.
Liability coverage protects you financially if you are found legally responsible for someone else’s medical bills or property damage related to the rental property. It will also cover your legal defense if you are sued, up to the limits of your liability coverage.
If you own items in the property for tenants to use, such as appliances or lawnmowers, they may be covered by a rental property insurance policy. Some insurance companies offer this as optional coverage.
Loss of rental income
If you are unable to rent your property for a period of time due to a loss caused by a problem listed on your policy, such as fire, lost rental income may be covered. This is also offered as optional coverage by some insurance companies.
What does rental property insurance not cover?
Some expenses will not be covered by rental property insurance.
Tenant’s personal property
If your tenant’s personal property is damaged, it is not covered by rental property insurance. Renters need their renters insurance to cover their personal belongings.
Equipment maintenance or failure
Things sometimes break. But if the hot water heater in one of your rentals dies, you’ll likely have to pay out of pocket for repairs or a replacement.
Home sharing, such as renting out a spare bedroom or a floor in your home is generally not covered by a rental property insurance policy. Rental property insurance is intended for properties that are not owner occupied.
Damage from floods or earthquakes
These disasters require their own separate insurance policies.
If you live in an area prone to such natural disasters and are renting out your primary residence, you may already have separate earthquake insurance or flood insurance for your home.
Rental Property Insurance Optional Coverage
Some situations are not usually covered by rental property insurance, but you may be able to add them to your landlord insurance policy, such as
If your property is intentionally damaged or vandalized, the damage is usually not covered by a standard property insurance policy. Some insurers offer vandalism coverage as an additional purchase feature.
Rental property insurance may cover damage to your property in the event of a break-in, but it usually doesn’t cover any stolen items. You may be able to add coverage for items used to maintain the property – such as a lawn mower or appliances – at an additional cost.
Property under construction
If your property is under construction, you may be able to purchase separate coverage for the structure until it is ready for tenants.
If you need to make repairs to a property, you may be required to make certain updates to comply with new building codes. Sometimes you can buy coverage to reimburse you for those situations.
This coverage can help if you are sued for wrongful eviction.
Do I need insurance for my rental property?
Insurance for short term rentals
If you rent out your primary residence only occasionally, you may not need rental property insurance.
For example, maybe you go on a few weekend vacations a year and rent out your primary residence during those times. In this case, your homeowners insurance policy may cover you in the event that your home is damaged while you are away. That’s because homeowners insurance sometimes covers short-term rentals.
Ask your homeowners insurance company if those rentals are covered, as every policy is different. You may need to add an insurance rider to ensure you have adequate coverage.
However, if you frequently rent out your primary residence, it is generally considered a business and not covered by homeowners insurance.
In this case, check out home-share insurance.
Insurance for long-term rentals
If you rent your property for long periods of time, such as several months or even years, you will probably need rental property insurance to protect yourself from potential financial losses.
How much does rental property insurance cost?
The Insurance Information Institute says that rental property insurance is about 25% more expensive than a standard homeowners insurance policy.
A recent Forbes Advisor analysis found that the average cost of homeowners insurance is $1,854 per year for $300,000 of home coverage and $100,000 of liability coverage. That would make the rental property insurance about $2,318 a year.
As is the case with any insurance product, the best way to find the cheapest rental property insurance is to shop around. Compare quotes from multiple insurers before making your decision.
Looking for home owners insurance?
Compare rates from participating carriers in your area via Policygenius.com