Being a landlord means wearing many hats. You’re a property owner, an investor, and running a business simultaneously. This means that your needs and obstacles are unique and you require solutions tailored as such. Landlord insurance will protect you from losses related to both damage to your property and personal liability.
Should You Get Landlord Insurance?
Yes, if you are a landlord, you should enroll in landlord insurance to protect yourself from losses. As with any investment, renting your home comes with risks:
- Damage to your home, other structures on your property, and personal possessions.
- A loss of rental income in the event your home is uninhabitable due to a covered loss.
- Liability issues regarding tenants and guests to your property.
A landlord insurance policy is the first line of defense you have as a landlord to protect against potential substantive losses.
A home insurance policy is important for homeowners, however, they do not cover properties that are used for rental income. Having homeowners insurance alone can leave you high and dry as if you fail to report the home as a rental property, your insurance provider is unlikely to accept any claims and may drop you as a client. Enrolling in landlord coverage protects you and your investment from many different perils you may face.
How Landlord Insurance Protects Your Property
Protecting your property is critical when you are a landlord. When you are renting a property, you are leaving the well-being of your investment in the hands of others. This can be a scary thought, but it doesn’t have to be. Let’s take a closer look at the many ways landlord insurance helps protect your property from harm:
- Dwelling Coverage- Your home and attached structures are protected from covered perils including damage from fire, hail, wind, and more. A common example of an attached structure is a connected garage.
- Other Structures Coverage- Structure such as detached garages, sheds, fences, and mailboxes are still at risk of facing a loss. A landlord policy provides coverage for these parts of your property that need protection but is not connected to your home.
- Personal Property Coverage- For your personal property to receive protection from a landlord insurance policy, it must be something left at the property that is to be of service for the property. So, if you were to have a lawnmower or washer and dryer damaged by a covered peril that is being used to maintain the property, you would be covered. If you were to suffer a loss for something else, such as a guitar, you’d be unlikely to receive compensation.
Landlords should be aware that these coverages come with deductibles. Choosing a higher deductible may lower your monthly premium but you’ll have to spend more after suffering a loss. A lower deductible can increase your monthly premium but will cost less when making a claim. You’ll also want to note the limits of your coverage to avoid any gaps in coverage. Asking an agent about your coverage needs can help you best understand the policy you need and how you are best covered against perils.
How Landlord Insurance Protects You From Liability
Physical losses are only part of the equation. As a landlord, the last thing you want to do is open yourself up to potential liability should a tenant or guest become injured while visiting your property. By having the right landlord insurance policy in place, you’ll protect yourself from paying for legal and medical expenses alone if you are found liable for damages. Unlike the coverages protecting your property, liability coverage doesn’t come with deductibles.
Loss of Rental Income is Covered by Landlord Insurance
Your investment pays returns in a variety of ways but the most notable is through rental income. If a covered loss causes your home to become uninhabitable, you may find yourself stuck with a vacant property but bills such as insurance, HOA fees, and property taxes continue to stack up. Landlord insurance can provide some relief, typically for around six months, to help you pay for these recurring costs until your property can house a tenant.
It is important to note that the loss of income due to tenants simply refusing or being unable to pay is not always covered by landlord insurance. There are additional coverage options and different brands handle these situations differently. Additionally, the price you charge tenants will also affect how much compensation you receive as well as the amount you pay in premiums. Properties with higher rental prices will cost more to insure. This is because the payout from your insurer for a loss of income claim would be higher than less expensive properties.
What Landlord Insurance Does Not Cover
Many perils are covered by your landlord insurance policy, but there are still events landlords should be aware of that are not covered. Such events include:
- General maintenance is not covered by landlord insurance. Should an appliance break down, you’ll need to either pay out of pocket, rely on your appliance’s warranty, or purchase a home warranty.
- Flood damage isn’t a covered peril under landlord insurance. You’ll need to purchase an additional flood insurance policy to protect against flood events.
- The personal property of your tenants is not covered against perils from your policy. A rental insurance policy is always the best practice for renters. This policy will provide coverage for their personal belongings while you protect the property itself with your landlord coverage.
- Vandalism isn’t always covered by a landlord policy. This includes unruly tenants who act destructively towards your property. There are additional endorsements, however, landlords can add to their coverage to protect against these types of perils.
- Items stolen from your property aren’t covered. While your landlord insurance policy will help you pay for damages incurred due to a break-in, it will not help you replace any stolen items.
- Rental properties under construction require additional coverage to stay protected. A common example would be a rental undergoing renovations and is vacant during this period. Additional coverages which help cover bringing a building up to code during renovations are also available. These coverages can help you avoid paying out of pocket as your standard landlord insurance policy may also not account for these costs.
- Certain acts of nature are not covered in the same way that flood events are not covered. Common examples include volcanoes and earth movements depending on where your home is located. In the same sense, war and acts of terrorism may also be excluded. Understanding your policy is imperative as each coverage is different for each landlord. Freedom Insurance Group encourages you to speak with your insurance agent to best understand your policy’s specific coverages and limits.
- Loss of rental income due to your tenants’ inability to pay may not be covered. You can purchase additional coverage known as rent loss insurance. Again, this varies from policy to policy.
The limitations found within a landlord insurance policy are often overcome through additional endorsements. Knowing the potential gaps in coverage you may face as a landlord can help you best prepare for the perils you might face and determine which additional coverages make sense for your investment.
Does Texas Require Landlord Insurance by Law?
No, Texas does not require landlord insurance, but it is clear to see that the benefits far outweigh the risks of going uninsured. Landlords who do not protect themselves against the perils they may face can spend far more on restoring their losses than any policy will ever cost them. Considering the rising cost of building materials, labor, legal fees, and medical expenses, we urge landlords to think long and hard about the consequences of renting without coverage.
Factors That Affect the Cost of Your Landlord Insurance
The way your insurance premium is determined by an insurance provider is the same as any other policy. Your insurer will calculate the amount of risk associated with taking you on as a client and create a rate based on their own weights and measures. Each company uses its own metrics to figure out how much customers pay. Still, many of the factors remain the same among brands, and may also share the same characteristics as a home insurance policy:
- Your home’s location, age, and size.
- Your claims history.
- If you are renting on a short-term or long-term basis.
- How much you’re charging for rent. (This is because your coverage will pay for the loss of rental income. Higher rent = higher premiums.)
- Your deductibles.
- The amount of coverage you choose.
- Any safety and security features that are part of your property such as smoke detectors and security systems.
Every rental property is different as are the needs of each landlord. Discussing these factors with your insurance agent can help you find the right coverage for your needs and save money in the process.
Freedom Insurance Group Helps Landlords Save Money on Coverage
Texas is one of the fastest-growing states in the country, and with a population increase, comes an increase of renters. Having coverage against the risks associated with renting a home will give you the inner peace you deserve while protecting your investment. Freedom Insurance Group understands the needs of landlords all across Texas and is here to help.
Our agents work for you instead of a singular insurance brand. This means that we can find you the lowest rate on the market with coverage tailored to your needs. We work with more than 25 top-rated insurance brands that offer coverages that mitigate your loss should one occur. By comparing your coverage needs among these insurance companies, we can find the best price for you without cutting your protection. The average customer that switches to Freedom Insurance Group saves 40% on their insurance premiums. If you’re a landlord with rental property in the Lone Star State, get a free landlord insurance quote today!