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Homeowners insurance is a type of property insurance that pays for the loss or damage to your residence. It can also include liability coverage against accidents that occur inside your home or on the premises.
Generally, homeowner’s insurance encompasses interior damage, exterior damage, damage to assets, and any injuries to an individual on the property. Not only is insurance beneficial to the home you are staying in, but you may also want to get landlord insurance for the home you are renting out.
What is Landlord Insurance?
Landlord insurance policies are especially offered to provide convenience to people renting out their properties to tenants. It combines your regular home insurance policy with added coverage for landlords.
Whether you need a homeowner’s policy or landlord policy depends on whether you would live in the property, and how often you want to rent out your home. Click here for a comprehensive guide about homeowners insurance.
For instance, if you are renting out a single room while still occupying the house, or renting out only occasionally, then a homeowner’s policy may suffice. On the other hand, if you plan to rent your premises on a regular basis, then a landlord policy may be a better option for you.
Landlord insurance can offer financial protection against various damages, such as fire, natural disasters, theft, vandalism, and issues linked to tenants’ lease. Here is an overview of what it may cover:
- Tenant damage: This includes intentional and unintentional damage caused by tenants, their guests, or pets.
- Rent loss: This only pertains to the events that the insurance provider has agreed to pay for.
- Building cover: If your house is destroyed due to fire, earthquake, flood, or cyclone.
- Contents cover for your belongings.
- Cost of taking legal action against your tenant.
- Legal liability: Your insurance company pays in case someone gets injured on your property.
However, it is important to note that landlord insurance does not cover every risk, as that would make insurance too expensive. Insurance providers need to arrive at a midpoint where they can cover common eventualities while keeping their risk manageable.
What Does Landlord Insurance Cover?
A landlord insurance policy takes into account the rental property and certain kinds of personal property that get damaged or stolen. It also compensates for the legal or medical fee if someone gets injured on your property. Here are some common aspects of landlord insurance:
Insurance can take care of damage to your physical rental property as well as certain belongings. Just like homeowner’s insurance, each type of coverage comes with a reimbursement limit, which is the maximum amount an insurance company would pay for a covered loss.
Various categories of coverage also have their own deductibles, which is the amount you pay to avail an insurance claim before your insurance provider pays for the loss. Property protection usually takes into account:
- Dwelling: This includes damage to the rental property in terms of smoke, fire, hail, windstorm, and other weather conditions.
- Personal property: This covers the loss to personal belongings inside the rental property. However, all personal properties are not covered. Landlord insurance only takes into account belongings that are a crucial part of the property, such as lawnmower or AC unit. It is best to check with your insurance company to find out the details of coverage.
Liability insurance claims come into play when a visitor or tenant gets injured on your rental premises. The policy covers you against unforeseen accidents, but make sure you still make an effort to keep the house as safe as possible for tenants.
This type of insurance can be used to take care of the medical expenses in case someone gets injured in the house and requires medical assistance, or if someone sues you over their medical injuries.
For instance if someone falls down the stairs, and the court decides that the stairwell was not built up to standard, then landlord liability insurance can help you pay for a lawyer.
In another scenario, if your tenant ends up with a fracture due to a fall, liability coverage can pay for their medical expenses.
Rent Loss Insurance
If your property gets damaged, for example due to fire, and becomes uninhabitable, you would be eligible for an insurance claim if your insurance package covers rent loss.
In such a case, your insurance provider would cover the lost rent and provide you the amount you would have received as rental income. This policy also enables you to continue making mortgage payments even when a tenant is unable to live in the house.
However, rent loss insurance is not applicable in every case. For instance, Coronavirus-related situations may not be covered by your insurance provider.
In addition to rent loss, some landlords may also be able to sign up for a type of business interruption insurance. This covers you from certain kinds of interruptions to the flow of your rental income. For instance, if you get injured, this policy can help keep your business running.
Home Emergency Cover
This is an optional policy that is useful for financially compensating the loss of vital services on your property. They help pay for the repairs in order to have the services running again.
Home emergency cover assists landlords in case of problems with heating, plumbing, drainage, or power supply. It may also include paying for alternate accommodation for your tenants while your property is under repair.
Home emergency cover usually protects against:
- Roofing problems
- Problems with doors and windows
- Plumbing and heating issues
- Issues with pipes, drains, or sewers
- Electricity issues
- Lost keys
This can either be opted for as a separate policy or as an addition to an already purchased insurance policy. The extent of contents insurance you require depends on whether you are renting out a finished or unfinished property.
A content insurance policy takes into account the price of repairing and replacing fittings and fixtures, such as furniture, carpets, and electrical items. If such items get damaged in a natural disaster such as a flood, then your insurance provider can pay for the repairs.
A contents insurance policy can only pay for the items that you have provided in the property. Items belonging to the tenants are not insured, such as their furniture and other belongings. It is crucial to understand the kind of coverage you have purchased and the amount the insurer has agreed to pay for, so that you know exactly what you would get when you file a claim.
Cash Value vs. Replacement Costs
When you restore or rebuild a damaged property, an actual cost value policy will offer to pay for the actual cost after subtracting the depreciation cost of damaged items.
For instance, if you bought an appliance for the property that gets damaged due to fire, the insurance provider will pay you the value after taking out the amount for depreciation, which will leave you with an insufficient amount of money to buy an equivalent replacement.
In order to solve this problem, replacement value policies provide you with a brand new appliance without charging for the depreciated value. However, an actual costs coverage policy would cost you a lesser amount than a replacement cost coverage.
What is Not Covered by Landlord Insurance?
While landlord insurance offers you a much-needed cover in many scenarios, there are some aspects that your insurance policy may not account for. Here is what may not be included in the policy you decide to purchase:
- Tenant’s personal property: Landlord insurance effectively covers your rental property, but it does not pay for your tenant’s property.
- Maintenance: General wear and tear of the house you have rented out is usually not covered by landlord insurance. As a property owner, you would have to pay for the routine maintenance of the house on your own.
- Shared property: If you rent out a room in the house you are also living in yourself, you may not be eligible for landlord insurance at all. Only non-owner occupied rental properties can be subject to landlord insurance.
- Pest infestations: Pest infestations are usually considered avoidable with everyday upkeep and are generally not included under landlord insurance. However, in some cases it may be accounted for under home emergency coverage.
- Natural disasters: Similar to homeowner’s insurance, landlord insurance does not offer protection against natural disasters such as earthquakes, hurricanes, and floods. However, you can purchase standalone earthquake or flood insurance policies for the property you have rented out.
Benefits of Landlord Insurance
Landlord insurance helps cover property damage caused by tenants or their visitors, pays the rent in some circumstances where the tenant does not pay, takes into account theft, and also offers to pay for the legal costs in case a tenant decides to sue you over damage to the house.
If you are planning to rent out a house that you own, landlord insurance can be rather useful because at times tenants can inflict damage that may cost you a large amount. Here are some of the prime benefits of purchasing a landlord insurance policy:
Peace of Mind
Once you have an insurance policy to fall back on, your worries regarding your rental property can take a back seat. If your tenant gets injured on the premises or ends up suing you, you will have both the medical and legal costs covered.
Continued Rental Income
If you do not have an insurance policy and your tenant breaks the rental agreement by quitting to pay your rent, it may become difficult for you to receive money from them. Landlord insurance policies offer coverage for loss of rent up to a decided amount. This policy is also applicable if you are missing out on rent while you wait for your property to get repaired.
Protection against Unforeseen Events
Landlord insurance protects you against extra risks that come with renting out a property. The insurance claim can pay for any burglary or theft by the occupiers or their guests. Moreover, it can also protect you against vandalism or malicious damage inflicted by the tenants or their visitors.
Mortgage Loan Installment Coverage
Landlord insurance policies can help pay your mortgage loan installments in case your rental property becomes uninhabitable, for example due to a fire. It can also pay for your mortgage installments in case you suffer from an injury, such as a disability. This is similar to personal accident insurance, but only takes in to account mortgage payments.
Flexible Payment Options
When you explore landlord insurance policies, you will find that many policies come with flexible payment options. This offers certainty as you will always know the premium amount you would have to pay each month, while being covered for repairs. On the other hand, if you do not buy an insurance policy, there may arise an eventuality where you would be unable to afford certain repair and restoration costs.
Landlord Insurance FAQ
Here are answers to some frequently asked questions about landlord insurance:
Does landlord insurance take tenant damage into account?
Generally, the answer is yes. In order to avoid this sort of damage to their property, landlords usually ask for a security deposit that would provide them financial backup.
Does landlord insurance pay for evicting a tenant?
Insurance does not usually take eviction costs into account. However, if you require eviction insurance, you can purchase a different policy.
Do I need landlord insurance?
Landlord insurance is not mandated by law. Nevertheless, it is vital to remember that your homeowner’s insurance is not likely to cover your rental property. This implies that any damage to the rental premises, your belongings inside, or any lawsuits against you would not be paid for unless you purchase a landlord insurance policy.
Landlord insurance provides you with a solid cover that can offer protection against theft, vandalism, loss of rent, or injury on your rental property. AC Insurance has been providing top quality landlord and homeowner insurance services since 1991. Click here to get a free quote today!