The Basics of Landlord Insurance
In general insurance policies offer two types of protection. The first part protects the physical structures on the property in case of a loss, while the second part offers liability protection in case of a slip and falls or other claims against your property. You will want your landlord policy to include:
Dwelling Coverage: This is coverage for the physical rental property. It is the cost to replace the existing structure. DP-3 is the best type of dwelling coverage you can get. It is the most expensive, but it includes coverage for “all risks” including vandalism and water damage. Claims are usually settled at replacement cost.Other Structures: You should have coverage for any additional structures on the property, such as garages or sheds.Personal Property: You want your policy to include coverage for any personal property you have at the rental, such as security cameras or equipment.Loss of Use: This is coverage for any rental incomeyou could lose. You want to make sure you have a loss of use equal to whatever your gross rents are. If you collect $5,000 a month in rent, you want your loss of use policy to equal $60,000, which would be the yearly rent collected.Medical Payments: This is coverage for any medical bills you may be responsible for.Liability: Liability coverage protects you against an injury or lawsuit.Separate Umbrella Policy: If you have a net worth that is more than the liability coverage on your property, you will want to take out an additional umbrella policy that sits behind the original policy to protect you for that additional amount.
Average Cost of Landlord’s Insurance
According to Insurance.com, the average cost for homeowner’s insurance in 2022 was $2,305, with premiums varying significantly based on where you live, the size of your home, and the age of your house. In general, landlord’s insurance is 15% to 20% more expensive than a personal homeowner’s insurance policy. This will bring your expected rate for landlord’s insurance to around $2,650 or $2,766 per year. Unfortunately, there is no average cost for landlord insurance. Costs will fluctuate wildly based on a significant number of factors. Costs will vary based on the state, county, city and even block your rental property is located on. The cost will also differ based on the type of rental property you own, these could include:
A condoSingle-Family homeTwo-Family homeMulti-Family, three- to four-unit houseApartment building: five or more rental unitsRetailOfficeIndustrial
Within these property types, you also have short-term rentals, seasonal rentals or full-time rentals. There is no average rental property, so there is no average landlord insurance cost. You should, therefore, get insurance quotes from several different insurance carriers to determine the best rate and protection for your rental property. The most important point is making sure you have the right type and amount of insurance coverage. The amount of your deductible will also impact your annual premium. Usually, the higher the deductible, the lower the annual premium.
A Sample Policy for a Two-Family Home in Portland, Oregon
The following is a sample landlord insurance policy for the year 2018, for a 3 family home in the state of New Jersey.
Dwelling Coverage: $655,000Other Structures: Not ApplicablePersonal Property: $5,000Loss of Use: $50,000Liability Coverage: $1,000,000Medical Payments: $10,000Annual Premium: $1905 for the year
Can Anything Help Reduce the Premium?
Maintaining your property, bundling your insurance policies with one provider, and choosing higher deductibles can all push down the cost of your landlord insurance premiums. Also check with your agent if discounts are offered for smart home safety monitors that can alert both you and your tenants of perils such as fire or flood.
What Is Excluded From Landlord’s Insurance
It is just as important to understand what your policy excludes. The insurance company wants to be as specific as possible, because if it is vague, they may be on the hook for it. The policy will say what is covered and also what is excluded from coverage. Make sure you look at this list to understand what you are not protected from.
