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What is Landlord Insurance?

Posted by David Ross on Sat, Mar 16, 2024

Contact us to save on Landlord Insurance in Philadelphia, Pittsburgh, Harrisburg, Erie, Lancaster, Allentown, Reading, York, State College, and anywhere else in Pennsylvania.Many new real estate investors assume homeowners' insurance will cover any damage or liability associated with their rental property. However, if you are not the resident of a property and instead rent it out to someone else – whether it's for a week or several years – you need Landlord Insurance, not Homeowner's Insurance, to protect yourself and your assets.

Why? Insurance is all about risk, and renting out your property to someone else increases risk. Therefore, if something happens to a rental property or someone is injured on the property, homeowner's insurance will not cover you. Furthermore, if you have a mortgage on the property, your lender will most likely require Landlord Insurance if you are not a property resident.

What is Landlord Insurance?

Landlord Insurance is a unique type of homeowners' insurance that protects your rental property, whether it's a house, condo, guest house, apartment building, commercial building, etc. It covers many of the risks that homeowner's insurance covers and more.

A good Landlord Insurance policy typically protects against three main risks:

  • Property Damage helps replace or repair damages to your property caused by fire, theft, vandalism, natural disaster, etc.
  • Lost Rental Income helps pay for lost rental income if the property is not inhabitable due to damage, severe mold, rat infestation, etc.
  • Liability Protection helps pay for medical and legal costs if someone is injured on your property.

You may hear the terms DP-1, DP-2, or DP-3. DP stands for dwelling property. DP-1 provides the most basic level of coverage, and DP-3 provides the most comprehensive coverage.

The cost of Landlord Insurance can vary, based on the following factors:

  • Location
  • Age and condition of the property
  • Security and safety equipment
  • High-risk features, such as pools and fireplaces
  • Short-term vs long-term tenants

Typically, Landlord Insurance costs about 25% more than a standard homeowner's insurance policy. Although it is not required by law, most lenders will require Landlord Insurance, and it makes good business sense.

Additional Riders to Consider

To choose the right coverage for your property, you need to consider the potential risks, how much cash reserve you have, etc. For example, if the property is near a river, you may want to consider flood insurance, or if you have little or no cash reserve and rely on the rental income to pay the mortgage, you may want to consider guaranteed income insurance.

Here are a few of the riders you may want to consider adding to your insurance policy:

  • Rent Guarantee (Aka Tenant Rent Default)- Covers you if a tenant skips out without paying rent.
  • Sewer and Water Line Backup– A break in your sewer or water line can cause a great deal of damage. Sewer and Water Line Backup coverage can help pay for repairs and cleanup.
  • Pet –Allowing tenants to have pets can reduce vacancy and enable you to charge higher rents. However, pets can cause damage or injuries, so if you decide to make your property pet-friendly, you may want to consider pet coverage.
  • FloodFEMA states, "In simple terms, a flood is an excess of water on land that is normally dry."
  • Non-occupied Dwelling – If a unit or property is vacant and damage occurs, landlord insurance may not cover it; however, non-occupied dwelling insurance typically does.
  • Burglary – Although the renter is responsible for his personal property, landlords often have property in rental units, such as washers and dryers, refrigerators, etc., that can be stolen.

10 Questions to Ask Your Insurance Broker About Landlord Insurance

The experienced agents at American Insuring Group are always happy to address any questions you may have. Here are some questions to ask:

  1. What are the deductibles on my policy?
  2. Does the policy provide replacement cost or cash value?
  3. Does the policy cover flooding, and what kind of flooding – natural disaster, sewer backup, etc.?
  4. Can I do anything to lower my insurance costs for my rental property – upgrades, repairs, etc.?
  5. Do you recommend any additional coverage?
  6. Do I qualify for any discounts?
  7. Does the policy cover both short and long-term rentals?
  8. Do I need a separate umbrella policy?
  9. What is NOT included in my policy?
  10. Will bundling multiple policies help lower the cost?

#1 Tip to Lower Landlord Insurance Costs Without Affecting Coverage!

Contact one of the independent agents at American Insuring Company who specializes in Landlord Insurance. They understand your needs, can make recommendations, answer any questions, and ensure you have the right insurance (no gaps, but also not paying for coverage you don't need). Plus, as independent agents, they will compare the cost of your coverage among many insurance companies to ensure you receive the lowest insurance premiums for the protection you need.

Call us today at (800) 947-1270 or (610) 775-3848, or connect with us online.

Tags: Landlord Insurance