How to Insure Rental Property as a Landlord

Insuring a rental property as a landlord is a completely different process from insuring a personal home. A standard homeowner’s policy is not sufficient because it does not cover the unique risks associated with being a landlord. The best way to insure a rental property is with a landlord insurance policy, which is a specialized form of property and liability coverage that protects the landlord’s financial interests and assets.

A landlord insurance policy, also known as a dwelling fire policy or a rental property policy, is a three-part policy that is designed to protect a landlord from the most significant risks they face.

• Property Coverage: This is the most fundamental part of the policy. It protects the physical structure of the rental property itself, including the building, fixtures, and other structures on the property like a garage or shed. It covers damage from a wide range of perils, such as fire, windstorm, hail, and vandalism. This coverage does not include the tenant’s personal property, which is the tenant’s responsibility to insure with a renter’s insurance policy.
• Loss of Rental Income: This is a crucial component of a landlord insurance policy. If a covered peril, such as a fire or a major storm, makes the rental property uninhabitable, this coverage will pay for the lost rental income while the property is being repaired. For a landlord who relies on that income to pay the mortgage, this is a vital financial safeguard.
• Landlord Liability Coverage: This protects the landlord from lawsuits that result from a third party’s bodily injury or property damage that occurs on the rental property. For example, if a tenant’s guest slips and falls on a broken step, this coverage would pay for the medical costs and legal fees.

When a landlord is insuring a rental property, it is important to consider additional endorsements and coverages that can provide a more comprehensive level of protection:

• Vandalism and Malicious Mischief Coverage: This protects the property from damage caused by a tenant or a third party.
• Building Code Upgrade Coverage: If a covered loss requires the landlord to rebuild the property to a higher, more expensive building code, this endorsement would cover the additional cost.
• Fair Rental Value Coverage: This pays the landlord the fair market rental value of the property in the event of a covered loss, regardless of the rent the tenant was paying.

It is also vital for the landlord to require the tenant to purchase a renter’s insurance policy. A renter’s policy protects the tenant’s personal property and provides them with liability coverage, which can help to protect the landlord from a claim if the tenant is found liable for a fire or other damage to the property. By combining a comprehensive landlord policy with a required renter’s policy, a landlord can ensure that they have the right amount of protection for all of the unique risks of their busines