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What Kind of Insurance Do I Need as a Landlord (And What Kind Does my Tenant Need)?

If you’re putting your property up for rent, it’s important to make sure you have all your ducks in a row before finding a tenant. (Read: Ready to Rent: A Checklist for Landlords). This is especially true when it comes to important liability issues such as obtaining proper insurance for your property. Without proper coverage, you risk leaving yourself vulnerable to financial losses, possible lawsuits, and the potential of having an empty bank account. Adequately insuring yourself against plausible risks on your property is the best way to keep yourself protected against significant financial losses.

If you have been living in the property and have homeowner’s insurance, this will not cover you as a landlord. You’ll need to contact your insurance agency and get a landlord’s policy. Without a landlord policy, the insurance company can refuse to cover damages.

What is Landlord Insurance and Why Do I Need It?

Landlord insurance protects the property you are renting. This includes the main residence and adjunct buildings or structures as well as maintenance tools and equipment kept on the property. (Read: What Maintenance Am I Responsible For As A Landlord?) Landlord insurance guarantees that you are protected from weather-related damage to your property as well as protection for any items that you decide to leave on the property for your tenants’ use.

Landlord insurance is for individuals who are planning on renting out a single-family home for an extended period of time (over 6 months). According to the Insurance Information Institute, if you’re considering renting out your property for only a short period of time (a couple weekends or a single week), you might not need to purchase additional insurance.

What Kind of Landlord Insurance is There?

Basic landlord insurance typically covers:

  • Residence: The dwelling in which your tenants live will be protected against loss from wind, hail, lightning, fire, and other severe weather occurrences.
  • Additional structures: If you have any additional structures on your property, such as a fence, shed, guest house, or garage, they will also be protected from any damage.
  • Personal Items Used for Maintenance and Upkeep of the Property: Any items are left on the property to assist with repairs or maintenance (such as leaf blowers, lawn mowers, and various power tools) will be covered against damage or theft.
  • Liability protection: If your tenant or a visitor becomes injured on your property and you are found responsible, liability protection will help cover the various medical, legal, and additional costs relating to the accident. Your policy limit will determine the extent to which you will be covered and your deductible will most likely be waived.

Depending on your policy, specific limits and deductibles will apply to coverage terms. The deductible is the initial cost you’ll pay for a loss covered by your policy before the insurance provider pays out. A limit represents the cap on the amount your policy will pay to you after a loss.

Some additional policies include protection against the loss of rental income (if for some reason your property becomes vacant due to a loss covered under your policy), theft of items from inside the rental (such as electronics and appliances) and vandalism. You might want to look into purchasing an umbrella policy, which groups additional coverage into a single package.

Why Do I Need It?

While it’s not illegal to forego landlord insurance for a rental property, it’s a good idea to have the additional coverage. If an unplanned disaster strikes your property, you’ll be responsible for paying for any losses yourself. Additionally, if someone becomes injured on your property or any other liability issues arise, you won’t be responsible for compensation relating to the accident. The option of having additional protection against loss of income relating to your rental is another plus of landlord coverage.

How Much Does It Cost?

The price of landlord insurance varies based on several factors, but it’s fairly typical that the policy will cost about 20 to 30 percent more than the standard homeowner policy since the insurance company inherently accepts more risk. Examples of factors that can affect the cost you’ll pay for your premium are:

  • The age and state of the building
  • The length of the rental period
  • Whether or not the property has a pool and/or hot tub
  • The specific coverage policy being purchased
  • The size of the building
  • The number of rental units you own

Does My Tenant Need Insurance Too?

While there’s no law requiring tenants to have renter’s insurance, it’s typically a good idea to get your tenant to agree to purchase coverage for their belongings since landlord insurance won’t protect against these kinds of losses. Items such as clothing, jewelry, electronics, furniture, and other valuables are all covered by renter’s insurance, up to your coverage limit. Many landlords write in a stipulation in the lease requiring the tenant to purchase insurance if they wish to rent the property, saving them from the potential hassle and expense of a lawsuit down the road.

The Virginia Landlord Tenant Act, states that the landlord can require the tenant to purchase renter’s insurance as a condition of tenancy. The landlord can also purchase the renter’s insurance and require the tenant to pay the premiums as part of the rent.