Landlord insurance is essential for anyone who rents out a property of any kind. There are 11 million landlords in the US, with a new unit coming onto the market every 80 seconds. Contrary to popular belief, ordinary homeowners’ insurance is not sufficient to cover damages caused by natural disasters, accidents or other damaging events. Homeowners’ insurance will not pay out if the property is unoccupied by its owner.
What Does Landlord Insurance Consist Of?
Landlord insurance consists of a number of core coverages. Every landlord insurance policy will cover liability, property damage, and lost rental income if the property is rendered uninhabitable. There are also other additional forms of coverage policyholders may add at extra cost, such as missed payment coverage and more in-depth natural disaster coverage.
Dwelling coverage is the core of any landlord insurance policy. It covers the whole cost of replacing the existing physical structure. DP-3 is the highest form of dwelling coverage. A DP-3 policy will provide coverage for all risks and will typically pay for the full cost of replacing the property. However, it is the most expensive type of dwelling coverage for a reason. Landlords may also take out an additional policy component that covers outbuildings set apart from the main structure.
Personal Property Coverage
Dwelling coverage accounts for the physical cost of the property, whereas personal property coverage includes personal belongings. This could include equipment in storage or security cameras.
Liability coverage protects landlords from being sued if an injury or some other damaging event occurs on their property. Even if a court rules a landlord liable their liability coverage will cover the cost. The experts recommend a liability coverage component of at least $500,000, but ideally landlords should opt for a minimum of $1 million. If your net worth is higher than the property, consider taking out an umbrella policy. In high-cost lawsuits this will stop anyone from coming after any personal assets.
Loss Of Use
If a property is rendered uninhabitable, landlords can rely on a loss of use insurance component. This will cover the rental payments that would have been received. The value of this aspect of the policy should match up with the annual rental income for that property.
If a landlord is found responsible for any ongoing medical bills, a form of medical coverage attached to the policy will have everything covered. The policy will cover medical bills the landlord is responsible for, whether short-term or long-term.
What Impacts The Cost Of Landlord Insurance?
Landlord insurance has no standard cost attached. Every landlord’s policy will have a different price tag based on a number of extenuating factors. Different insurers will also come up with different prices, hence why it is important to consult a number of providers.
Location Of The Property
The location of the property has a big influence on the cost of landlord insurance. Depending on the property’s location it may be more prone to flooding, fire, landslides or hurricane damage. Any factor that increases risk will see the cost of the insurance policy rise.
Length Of Rental Time
Insurers price their policies based on the likelihood of the holder making a claim. If a rental property has a long history of housing the same tenant without a claim, premiums are going to be lower. If there is a history of tenants moving in and moving out within months of each other, this is a red flag. It elevates the chances of the landlord making a claim for damages or lost rent.
Type Of Property
The more valuable the property the more the policy will cost. This is true depending on a lot of different things, including size appliances and more. A one-bedroom apartment will always come with lower premiums than compared to a multi-room location.
Comprehensive landlord insurers will want to know about the steps a landlord is taking to protect their property. Large gates, security cameras, and burglar alarms are just some of the assets that can lower insurance premiums. Anything that reduces the odds of a burglary, vandalism or any other damage to the property will lead to smaller monthly premiums.
Amount Of Coverage Options Provided
Every landlord insurance policy is different, but what all policies have in common is that the more coverage options included, the higher the cost. If an insurer has to payout in more scenarios, the risk for them is greater and so the policy holder will be expected to pay higher premiums.
Speak To An Experienced Personal Insurance Agency
There is no average cost for landlord insurance. The most important factor in taking out landlord insurance is to make sure you work with an experienced insurance agency that pays out when you need it. Get in touch with Merchant Family Agency for a consultation and a quote on your landlord insurance policy.