Getting Rental Property Insurance

Getting Rental Property Insurance

Rental Property Insurance, also known as Landlord Insurance, is an important layer of protection for anyone managing rental properties. Not to be mistaken for Homeowners Insurance, Rental Property Insurance coverage steps in to protect the owner and manager should any issues arise once a resident is occupying the property.

In this article, we’ll explore the importance of Rental Property Insurance, what coverage typically includes, how to obtain coverage, and a general overview of associated costs.

Let’s get started!

Who Needs Rental Property Insurance?

While Rental property insurance is not required by law, we consider it absolutely essential for anyone who owns or manages rental properties, including landlords, property owners, and property managers.

The reason is that the typical Homeowner’s Insurance policy, while helpful in protecting your property when it is owner-occupied, will not cover your property once a renter moves in. 

Additionally, most mortgage lenders require landlords to carry insurance on rental properties as a condition of the loan.

Overall, anyone who owns or manages rental properties should invest in rental property insurance to protect their financial interests and assets.

What Does Rental Property Insurance Cover?

Getting Rental Property Insurance

A Rental Property Insurance policy is structured as:

  1. Core coverage, or base plan

  2. Add-ons to extend coverage, also known as Riders (we’ll explore this in more detail later on)

The policy’s core coverage includes property damage, liability coverage, and lost rental income coverage. Let’s explore each in more detail.

Property Damage

Property damage coverage protects your property in the event of natural disaster, fire, water damage, or vandalism.

Pro tip: Look for a policy that provides a predetermined lump sum or the replacement cost instead of actual cash value. This is especially important if the features in your property are old.

Lost Rental Income

Lost rental income coverage comes in handy when your property becomes completely uninhabitable due to a covered circumstance such as fire, pest infestation, natural disaster, or vandalism. If you are unable to collect rent from your residents, this coverage reimburses you up to the coverage limit specified in your policy. This is essential for landlords to meet their mortgage obligations and other critical expenses that don’t stop just because your residents can’t occupy the property.

Liability Protection

Liability protection provides financial coverage for landlords in the event they are held liable for third-party bodily injury or property damage that occurs on their rental property. This coverage is essential for landlords to protect themselves from potential lawsuits and legal expenses arising from accidents or incidents with their residents.

What are Policy Riders?

Rental property insurance policies often offer riders, also known as endorsements or add-ons, that allow you to customize your coverage to meet your specific needs. Some common examples of riders include:

Additional Insured Endorsement

This rider extends coverage to additional parties, such as property managers, contractors, or co-owners, who have an insurable interest in the property. It provides liability protection for these additional insured parties.

Short-Term Rental Endorsement

This rider provides coverage for properties rented out on a short-term basis, such as vacation rentals or Airbnb properties. It may include coverage for property damage, liability claims, and loss of rental income specific to short-term rental arrangements.

Extended Replacement Cost Coverage

This rider increases the coverage limits for property damage, allowing landlords to rebuild or repair their rental property to current building code standards in the event of a covered loss. It provides additional financial protection beyond the standard coverage limits.

Water Backup and Sewer Coverage

This rider provides coverage for damage caused by water backup or sewer line issues, such as sewage backups or sump pump failures. It covers repair costs and property damage resulting from water intrusion into the property.

Ordinance or Law Coverage

This rider provides coverage for additional expenses incurred to comply with building codes or ordinances when repairing or rebuilding a rental property after a covered loss. It covers costs associated with upgrades or modifications required by local building codes.

Landlord Contents Coverage

This rider protects landlords' personal property located on the rental property, such as appliances, furniture, and fixtures, against loss or damage caused by covered situations. It supplements the standard personal property coverage.

Animal Liability Coverage

This rider provides liability protection for incidents involving animals kept on the rental property, such as dog bites or injuries caused by pets. It covers legal expenses and compensation for damages resulting from animal-related incidents.

These are just a few examples of common riders available for rental property insurance policies. It’s important to carefully review your insurance options with a professional and consider adding riders that provide additional coverage tailored to your specific needs and potential risks.

How to Obtain Coverage

Obtaining rental property insurance coverage is similar to the process property owners take in securing their homeowner’s policy. Here's a quick breakdown of how you can go about obtaining coverage for your rental property:

Research Insurance Providers

Start by researching insurance companies that offer rental property insurance policies. Look for reputable and financially stable insurance providers with experience in providing coverage for rental properties.

Assess Your Insurance Needs

Evaluate your specific insurance needs based on factors such as the type of property you own, its location, size, condition, and occupancy. Consider any additional coverage options or riders you may need to address specific risks or liabilities associated with your specific property.

Get Multiple Quotes

Obtain quotes from multiple insurance providers to compare coverage options, premiums, deductibles, and policy terms. Consider factors such as coverage limits, exclusions, and customer service reputation when evaluating quotes.

Review Policy Terms

Carefully review the terms and conditions of each insurance policy to understand the coverage provided, exclusions, limitations, and any additional endorsements or riders included. Ensure that the policy meets your insurance needs and provides adequate protection for your property.

Consult an Insurance Agent

Consider consulting with an experienced insurance agent or broker who specializes in rental property insurance. An insurance professional can provide expert guidance, help you understand your coverage options, and help you choose the right policy.

Apply and Provide Property Information

Be prepared to provide detailed information about your rental property, including its address, construction type, occupancy details, and any security or safety features installed on the property when applying for a policy.

Review and Finalize Coverage

Review the final insurance policy documents to ensure they accurately reflect the coverage options, terms, and premiums agreed upon. Ask any questions you may have before finalizing the coverage to ensure you fully understand the policy.

Remember to Update Your Policy!

Keep lines of communication open with your insurance provider and remember to update your policy as needed to reflect any changes to your rental property or insurance requirements.

Cost of Coverage

The final cost of your policy will depend on many factors such as property location, size, age, and condition. 

But, on average, rental property insurance is 25% more expensive than an equivalent homeowner’s insurance policy, with the average cost coming out to $2,192 per year.

If you determine that additional coverage in the form of riders will best protect your property, these add-ons will also add to the overall cost of your policy.

Overall, the structure and scope of your plan will determine the final cost and, of course, this depends greatly on your specific rental property.

No matter the cost, we believe that rental property insurance coverage is well worth the investment even just for the peace of mind it affords landlords who already deal with so many logistics when it comes to managing their rental property.

Final Thoughts: Getting Rental Property Insurance

Many landlords make the mistake of assuming their homeowner’s insurance policy will cover their property when they transition into the rental market. It’s crucial to understand your coverage, identify your specific needs, and even consider consulting with a professional to make 100% sure your rental property is covered from all angles.

Disclaimer: We do not offer rental property insurance here at Evernest. We recommend consulting with an insurance professional to understand your options.

If you’re looking for a top-notch property management company to handle the logistics of running a successful rental property, we can help you there. Head to our website to find the Evernest team in your area and get started today!