All forms of insurance are designed to protect what’s most valuable to you from all the things that could go wrong. With rental property, there’s a wider variety of thing that could go wrong and often a greater chance that something will, so why skimp on landlord insurance? A top-notch landlord insurance policy will cover damage done by tenants, losses from unpaid rent, fires, deterioration, and lawsuits, as well as other situations that can end up sticking you with a big bill. Policies for landlords can differ wildly, and it’s important to shop around for the right protection, depending on the region the property is located in and the age of the home, as well as several other factors. But if investment property is going to be a part of your life and a cornerstone of your income for the long haul, you’ll quickly learn that the worst-case scenario can happen, and there’s no reason not to be protected.
1. Insuring Against Tenant Damage
Tenant damage i included as a standard peril in many landlord insurance policies, but for some you might have to add it separately. Keep in mind, not all tenant damage is automatically covered by insurance. Normal wear and tear that comes with having people occupy the house is inevitable, but insurance will cover both malicious acts of damage or vandalism and cases of gross negligence. In both cases, you will need reasonable proof, which is why it’s important to take pictures of the interior and exterior of the home before you rent it out and save all your paperwork. Damage to property owned by the tenants is not included in landlord insurance, which is why some renters opt to take out a renter’s policy. According to MSN Real Estate, more and more landlords are making that a requirement in their leases, to avoid lawsuits and the bills they might incur from having to remove damaged property themselves when it gets left behind.
2. Hazard, Fire, and Flood Protection
In America, millions of home fires result in over $10 billion in property damage every year, which is why fire and hazard coverage is the most common form of landlord insurance. Most insurance companies have various add-ons for the fire and hazard coverage they offer, which can range from sewer backup to terrorism, and everything in between. Usually, you can tailor your specific policy to the neighborhood and region of the home. Flood insurance is an entirely different type of coverage, however, and not all homes really need it. But if you’re buying property in a designated flood zone or somewhere that’s experienced floods in the past, you want to invest in a separate flood insurance policy for the property. Normally, damage insurance for landlords will only cover leaks and burst pipes, not damage from external water. And in some areas, hurricanes and floods are a major risk.
3. Liability Insurance
There are all kinds of situations that might arise where a tenant is hurt due to the condition of the house, or their property is damaged due to a collapsing roof, leaky sink, or broken window. Still other cases can arise where a tenant wants to sue you for wrongful eviction or other accusations of improper dealing. That’s why liability insurance is important to avoid financial losses in the case of a lawsuit. Insurance can cover your court costs whether you win or lose. Personal injury coverage can also pay for a tenant or visitor’s medical bills in the event they get hurt, and liability can even cover your vehicle. There may be different standards for insurance claims in your state, and your claim can be rejected if you are proven to have been negligent or the house is in dangerous condition. You may also be required to protect from crime by keeping doors and entrances well-lighted and with adequate locks. Landlord insurance can also help protect you from liability for your tenants’ actions, such as out-of-control pets or bad behavior. Landlords run the risk of being implicated in a number of different cases, so you need to be protected.
Renting property is not only an investment, it’s a business, and it should be treated as such, especially when it comes to insurance. Landlords need as much protection as other types of business owners and independent contractors, and because there are so many things that can go wrong with the upkeep of a house, much more. You do your best to select the right neighborhoods to buy into and the right kind of people to rent to, but if you’re in the business long enough, you’ll find out that nobody as a perfect track record with property or tenants. So there’s no reason not to shell out as little as a few hundred dollars a year in order to save yourself much more. It only makes sense in the long run.
Author Amy Thomson blogs for Monkey.co.uk. . Check out her other articles at You can follow her on Twitter @VroomVroomAmy.
