New landlords often think that their homeowner’s insurance covers their rental property. But that is not so. You will need landlord insurance to protect your rental property from perils, disasters, and other harmful issues, says Domain Property Management.
If you previously occupied your property but later decided to lease it, you must obtain landlord insurance. Your tenants will not be liable for accidents, fire outbreaks, structural damages, theft, and so on that may occur on your property. For that reason, you need landlord’s insurance.
What Does Landlord Insurance Cover?
A comprehensive landlord’s insurance policy provides three broad coverages: property protection, lost rental income protection, and liability protection. These will shield you from financial mishaps.
1. Liability protection
Your tenant or a visitor may sustain an injury or fall ill because of some maintenance issues you forgot to fix. They may decide to take legal action against you, which can result in you having to pay for the legal, medical, and other expenses.
If you have landlord’s insurance, such liabilities will be covered up to the policy’s limit. It will also cover your legal fees; deductibles are not required for liability claims.
2. Lost rental income
If the property becomes uninhabitable (following fire outbreaks, pest infestation, sinkholes, molds, etc.), the landlord’s insurance can offer you temporary reimbursement for the rental income you would have gotten from the property for a period.
3. Property protection
Owning a rental property is a huge investment you want to protect. Damages to it can make it lose its value or become uninhabitable. The landlord’s insurance will cover the physical property you lease to tenants. That includes the dwelling and accessories you install on the property. Such coverage entails the following:
- Dwelling: The landlord’s insurance covers the building you are leasing out to tenants from issues such as hail, fire, wind, thunderstorms, and other losses included in the plan.
- Accessories: Most landlords install electronics and accessories on the property to help the rental run smoothly. These accessories must be personal property used to service the rental. Such accessories include carpets, curtains, vacuum cleaners, microwaves, dishwashers, washing machines, snow blowers, and lawnmowers. These items are protected under the landlord’s insurance.
- Other structures: Apart from the dwelling place you lease out, the coverage will benefit other areas on your rental property. These may include detached structures such as patios, fences, detached garages, etc.
The landlord’s policy will specify the limits and deductibles for all these physical properties. Depending on your providers, you can set your deductibles and limit amounts for each coverage.
Additional coverages you may consider for your landlord’s insurance
You may require extra packages under the landlord’s insurance depending on the peculiarities of your rental property or its location.
Below are additional packages to consider:
- Flooding: Most standard landlord insurance does not offer protection against flooding due to natural disasters or municipal plumbing. If your rental property is in a neighborhood prone to flooding, you must purchase an additional package for flooding.
- Updating building codes: Sometimes, you may have to repair damages to your rental property, and the building codes require that you make upgrades because the city’s codes changed after your property was first constructed. In this case, the landlord’s insurance can reimburse you.
- Vandalism: Bad tenants may vandalize your property intentionally. Such damages will be covered if you purchase this package.
- Earthquake insurance: If your rental property is in an earthquake-prone area, you need to be protected. Get this additional package to supplement your landlord’s insurance.
- Emergency coverage: Emergency issues may happen on your rental property, and tenants may require urgent attention. This package will cover all the costs, including travel expenses, to resolve those emergencies.
- Guaranteed Income Insurance: This policy will cover such issues if your tenant fails to pay rent.
What the landlord’s insurance doesn’t cover
It is essential to note that there are some exceptions to issues the landlord’s insurance can cover. Below are a few instances:
If you reside on a property and lease part to renters, your landlord’s insurance will not provide coverage. In such cases, you will have to discuss an additional package for your homeowner’s insurance with your insurers.
Landlords’ insurance doesn’t cover tenants’ property, so tenants must subscribe to renter’s insurance. In some cases, landlords’ insurance may require tenants to have renter’s insurance, so renters must prove they have it before landlords can lease the property.
It would be best not to assume that your landlord’s insurance covers every liability and damages. Always discuss with your insurers to know the exclusions and extra beneficial packages you may need.