Landlord insurance is a specific type of property insurance that protects landlords against any potential liability caused by tenants and is generally required on investment properties. Typically, a landlord insurance policy is 20-30% more expensive than a homeowner’s policy. A standard landlord insurance policy includes dwelling coverage, loss of rental income and liability coverage.
The Hartford makes getting a comprehensive landlord insurance policy easy. Their team of specialists will get you a customized insurance quote based on your needs. Whether you own a single-family residence, multifamily, or condo, The Harford has a rental property policy to fit your needs. Fill out their short, online questionnaire to get a free, no-obligation quote.
Where to Find Landlord Insurance Providers
There are many landlord providers to choose from. We list and recommend these 3 below since they’re reputable, well-known companies that offer mostly nationwide coverage at competitive rates. Keep in mind, if you already have other insurance – such as an auto policy – you will probably get the best discount by using the same company.
Here are the three top landlord insurance providers:
Allstate Insurance has been around for years. What stands out about them is that they have a list of landlord discounts. These include things like paying your bill paperlessly to save money and switching over other insurance policies to receive a multi policy discount. They also offer their landlord policyholders discounts at some hardware and retail stores.
Not all insurance providers offer flood insurance in flood zone areas, but Allstate does. They may be right for you if you have a rental property on the waterfront. You will have an agent, not just to work on your policy and claims but to ask questions regarding what type of coverage you may need and what’s covered and what’s not. This means they’re also right for you if you want the individual attention of an assigned agent.
Nationwide Insurance lets you get a rental property insurance quote online or directly speaking with an agent in the area in which your property is located. They offer discounts for various reasons, such as a multi policy coverage, if you’re 60 + years old and if your property has qualifying devices such as a burglar alarm. As their name suggests, they cover properties nationwide. Peril insurance isn’t national, so you would need to contact them directly to see if they offer peril insurance in your area.
They offer a variety of insurance plans as well as retirement and banking services so if you like a one stop shop, then Nationwide is probably the right company for you. Their website is also well laid out so if you want to keep track of and pay your policy online 24/7 then they’re a good choice.
State Farm is a little bit different since they offer two types of landlord insurance, one specifically for condos and one for any other types rental properties. State Farm asks for your property’s zip code and then directs you to an agent in the area. They don’t offer flood insurance but have a link with a site to go to for companies that do. They also offer multi policy discounts but don’t mention any other discounts for landlord policies.
State Farm is right for you if your rental property is a condo since they have a policy specifically for that. While you’re on their site, you can also check out their helpful articles and tips for landlords.
Landlord Insurance Costs
Since there are myriad factors that can affect the cost of landlord insurance, getting a general price – even a ballpark price – can be very difficult. That said, a good rule of thumb for basic landlord insurance is to expect to pay anywhere from 20-30% more than you currently pay for homeowner’s insurance in your area.
So, since the average homeowner’s policy in New York is $1,130, the cost of landlord insurance would likely be around $1,356—$1,469. Keep in mind that the average homeowner’s insurance policy reflects the average price of a home in New York State. According to data from Zillow, that’s $280,600. Using these figures, If you’re trying to insure a $600,000 rental property, you should expect to pay roughly double the average, or close to $3,000 per year for landlord insurance.
“Although landlord insurance is more expensive than a traditional homeowner’s insurance policy, it’s also tax deductible. It is considered an expense related to running a business.” – Crystalynn Shelton, CPA, Writer, Fit Small Business
For more information on taxes relating to rental properties, check out our guide on rental property tax benefits and deductions.
Factors That Affect Landlord Insurance Rates
Since not all rental properties are created equally. Below are a few factors that will influence how much you’ll pay for rental property insurance. While some factors that affect pricing like location or construction materials can’t really be changed, having up to date repairs and installed safety features like fire sprinklers means lower landlord insurance premiums.
Here are some of the factors that affect the price of your landlord insurance policy:
- The replacement cost of your rental property
- The number of units in your property
- The age of your rental property
- The condition of your rental property (such as normal wear and tear)
- The geographic location of your property
Proximity to natural risks such as areas prone to floods, fires, and hurricanes will be considered as well. The insurance agent will also want to know if you allow tenants to smoke in the property and if you have burglar alarms, fire sprinklers, or fire alarms installed. The construction of the property affects the policy cost too, generally, masonry buildings are cheaper to insure than wood frame buildings.
Other factors taken into consideration include crime rates in the area and if you allow short term or long term rentals. If you allow short-term rentals, you may pay a little more for the insurance policy. A swimming pool, hot tub, and fireplace or wood burning stove can also increase the cost of your policy.
However, a multi policy discount will help reduce the policy’s cost. So, if you purchase landlord insurance from the same company you have homeowners or auto insurance, you may be able to take advantage of some savings.
“If you’re looking to save a bit on your premiums, carpet cleaning and painting costs, you should consider including a non smoking rider with your lease. From my experience renting out apartments in New York City, this is now a common rider for most luxury buildings. The only caveat is if your rental property is in an area with very high vacancy rates. Beggars can’t be choosers.” – Emile L’Eplattenier, Real Estate Analyst/Editor, Fit Small Business
If you’re shopping for a great rate on a comprehensive policy, contact the team at The Hartford. Bundling coverages together could help you get the protection you need at an affordable price. To discuss their Rental Property Protection Plus plan, fill out this short online form. There’s no cost or obligation to speak to an expert about insuring your investment.
How Landlord Insurance Coverage Works
Landlord insurance is a specific type of insurance policy that covers structural damage to a building or home, personal injury, and lost rental income from listed perils like storms, accidents, and vandalism. Landlord insurance combines elements of homeowners insurance and small business insurance in order to protect a rental property owner from monetary losses.
Even if you have the best homeowners insurance policy in the world, the chances of your existing policy covering use as a rental property are pretty much zero. While there are a few legal reasons for this, the primary reason is that your rental property is not just a home or an asset. It’s a business. That means that the potential risks for the insurance company are different from a typical homeowners policy.
For property owners, the risks are also very different. You’re more than likely relying on your rent roll to cover fixed costs like your mortgage, taxes, etc. If there are damages that make your rental property uninhabitable, then you may run the risk of not only losing income but ending up in foreclosure as well. This is a big part of the reason why so many lenders require borrowers who are financing rental properties to purchase a landlord insurance policy before finding tenants.
What to Look for in a Landlord Insurance Policy
It’s important to know what to look for in a rental property insurance policy because you want it to cover your specific property and protect you from potential liability. You need to know what your deductible is, what is covered and what’s not and if you’re protected from things like vandalism, flooding, hurricanes or theft.
Now that you have an idea of what factors influence the cost of your insurance and how to prepare yourself to shop for it, here are a few tips from the pros on what to look for in a good landlord insurance policy. Please note that this is not an exhaustive list by any means and you should always carefully review the fine print of any policy you’re considering. We separated the recommendations here into two sections: costs and coverage.
Things to consider when buying a landlord insurance policy include:
Landlord Insurance Costs & Premiums
Let’s face it, cost is almost always going to be of primary concern for most new and newer landlords. After closing costs, renovations, mortgage payments, property management software, and marketing, your margins may already be quite thin. This is why many landlords choose policies with lower premiums and higher deductibles. Remember that average premiums are 20% – 30% higher than standard homeowners policies.
Landlord Insurance Deductible
Your landlord insurance deductible is the amount you’re required to cover out of pocket before your policy covers any costs. Typical landlord insurance deductibles range from $1,000 – $2,500. Once you exceed this deductible, your insurance policy will cover any additional costs for the remainder of the year. The higher the deductible the lower the premium, and vice versa.
“The importance of insurance for a new or seasoned landlord falls on the quality of the carrier, the coverage they offer, and the service they will receive from the agent. Price is always a factor, yet should not be the most important one. Consider going with a higher deductible of $2,500 instead of the lowest $1,000 deductible plans. Most owners will end up paying the costs directly up to the $2,500 range to avoid having a loss claim on their insurance for the extra premiums it will cost them in years to come. While this may end up being more expensive in the short term, it will mean better pricing in the future as your portfolio grows. – Brandon Stein, COO, LBPM
Property or Dwelling Coverage
Property coverage, sometimes referred to as dwelling coverage, covers the physical structure and permanent systems in your rental property. This generally includes the building itself, as well as heating, plumbing, and air conditioning systems.
Dwelling coverage will generally also cover your rental building from specific risks known in the insurance industry as perils. In order to determine what perils are covered by a specific policy you’re considering, you need to review the named perils (aka covered perils) in the policy. If a specific peril is not named in the policy, it will more than likely not be covered. Some companies, like The Hartford, offer all-perils coverage, meaning that everything is covered unless it is specifically excluded.
Generally speaking, most landlord insurance policies will cover fire, lightning, wind, hail or snow damage. Floods, earthquakes, theft, or other perils may require additional coverage.
“Even if you purchase a policy that covers vandalism, there’s a strong possibility that you may end up paying out of pocket to fix the damage. Most people who vandalize your rental property by breaking windows, stealing copper pipes etc. will wait until your property is vacant. Unfortunately, many landlord policies DO NOT cover perils, like vandalism, if the property has been vacant for more than 30 days. If your rental is in a high crime area, or will be vacant for 30+ days, ask your agent about any gaps in coverage.” – Ken Corsini, Investor, Georgia Residential Partners
Replacement Cost Value
“Always try and get a policy that covers the RCV (Replacement Cost Value – aka what it would cost to replace your home today) instead of ACV (Actual Cash Value – aka what your home is worth today after depreciation). The difference is that an ACV policy reduces any claim about old the property is. While this may not matter very much year two, you can potentially lose tens of thousands of dollars if you have the same coverage year 10.” – Ryan Boykin, Co-founder, Atlas Real Estate Group
Personal Property Coverage
Personal property coverage insures any personal property that you may have in your rental unit. This can include appliances, rugs, carpets, tools like lawnmowers, drapes, curtains, or furniture in the case of furnished rentals. If you have a furnished unit with high end appliances, you may want to consider a plan that covers personal property.
“There is usually much less Contents Coverage, than a normal homeowner’s insurance policy, since usually the only things the landlord owns in the rental are larger appliances and built in cabinets, unless the rental is furnished. The tenant’s belongings will be protected by their Renter’s Policy, which I recommend all of my Landlord clients require.” – Ben Guttman, CPIA, North Central Insurance Agency
Liability coverage is another important add on to consider when purchasing landlord insurance. This covers physical injuries that occur on your rental property. If a tenant or their guest trips and falls down the stairs or gets injured in a fire, they can sue for damages.
Ryan Boykin recommends getting at least $1,000,000 per occurrence and $2,000,000 aggregate for the year. Per occurrence means you will be covered for up to $1,000,000 each time someone gets hurt in your unit in one coverage year. The aggregate is the total amount of money the insurance company will pay for the year for multiple incidents where someone is hurt.
Rental Income Protection
Rental income protection will cover your loss of rent for a specific amount of time your rental property becomes uninhabitable due to a named peril. For example, let’s say your entire rent roll is $3,600 per month from three $1,200 one bedroom units.
Your building gets struck by lightning and all three units are left without electricity, and there is significant water damage in the common areas. Clearly, your units are uninhabitable until you can get the electricity back on, and fix the water damage in the common areas.
If you have a policy that has rental income protection, your carrier will pay out your normal rent roll of $3,600 while the repairs are made. While this may help keep you afloat, most policies will not pay for relocating your tenants to temporary housing, and will generally put a limit on the amount of time they will pay out your rental income.
Acts of God
Floods, earthquakes, sinkholes, tornadoes, hurricanes, tsunamis, are all considered acts of God in the industry and may or may not be named as perils on your policy. If your rental property is located in an area prone to a specific act of God, like floods or hurricanes, you will want to make sure your policy includes it as a named peril.
Every investment property is different and smart landlords will schedule a free consultation with a leading insurance company to get a quote on a policy built specifically to meet their needs. We recommend getting a free, no-obligation quote from The Hartford. You can speak to a landlord insurance expert by filling out this brief, online form.
How to Shop for Landlord Insurance
The first step toward purchasing landlord insurance is to take an accurate and honest assessment of your rental property. Be prepared to have the rent roll ready and be knowledgeable about the market value of the property. You should also take inventory of any personal property that’s included with the rental, such as furniture or drapes.
Here is some of the information you should have ready when shopping for a policy:
Know the Current Value of Your Property
This is perhaps the most important information you can have to get the right landlord insurance policy. After all, if your rental property is damaged beyond repair, your insurance company will need to know how much it will cost to rebuild.
If you’ve just purchased your rental property, then you should have an appraisal that you can show your agent. If not, or if you’ve made significant repairs to the property, then either hire an independent appraiser or talk to your agent to see what they recommend.
Have Your Current or Projected Rent Roll Ready
Since your landlord insurance policy will cover your rental income losses, your agent needs to know how much your current or projected rent roll is. If you already have tenants, then copies of their current leases will be extremely helpful. If not, find comparable rentals to get a sense of what your rent roll will be.
If you’ve purchased the property as a rental, then you should already have this information in your business plan.
Provide Proof of Installation of Fire Sprinklers/Burglar Alarms etc.
If you’ve installed fire sprinklers, burglar alarms, heavy duty locks or doors, or security gates on your property, gather receipts from contractors or other documentation and provide it to the insurance agent.
Documentation of Any Personal Property in the Unit
In insurance terms, personal property means anything you are providing for your tenants that is not a physical part of the unit. This is especially important for furnished or semi-furnished apartments. Other personal property that you can consider insuring are appliances, drapes, rugs or carpets, bookshelves, air conditioning units etc.
Get at Least Three Landlord Insurance Quotes
Once you’ve gathered the important information about your rental property, it’s time to pick up the phone and get some quotes. It’s better to call insurance agents rather than get online quotes, because the online quote may not be accurate if all of the rental property’s information isn’t asked for.
Generally speaking, there are two angles of attack here:
Contact a local Independent Insurance Agent
An independent insurance agent will ideally be able to assess your situation and get you quotes from multiple insurance carriers at once. In order to find a good broker, trustedchoice.com is a good place to start.
Reach Out to Insurance Companies Directly
If you’d prefer not to use an insurance broker, you can always reach out to carriers directly. If you already have a home, auto, boat, or other policy, then you should always reach out to them first for a quote. Most large insurance companies will offer a multi policy discount, which can save you money on premiums.
Farmers, State Farm or Allstate all have excellent reputations and offer comprehensive landlord insurance plans. Just keep in mind that as your portfolio grows you may outgrow the insurance policy your carrier of choice offers.
What Renters Need to Know About Landlord Insurance
After renting hundreds of apartments, there is one piece of advice that I always gave to my landlords and tenants alike. Get renter’s insurance. Renter’s insurance is not only incredibly cheap— generally less than $15 per month— it is the only protection your tenants will have for their personal belongings.
Regardless of who is at fault, your tenants’ belongings are rarely ever covered by landlord insurance policies, and the law doesn’t require them to be. That means that even if you bodge the plumbing and destroy their $2,000 MacBook Pro, they’re still going to wind up paying for it.
So take an extra few minutes at every lease signing to explain just how important renter’s insurance is for your tenants. Trust me, an awkward conversation at a lease signing will save you endless headaches down the road.
The Bottom Line
Every rental property owner needs a rental property insurance policy, While there are many coverage options to choose from, you should choose a policy that gives you adequate dwelling coverage— including from perils common to your area— and at least $1,000,000 of liability coverage. The landlord insurance cost is small relative to the security it provides.
If you’re ready to speak to someone about landlord insurance for your investment property, reach out to The Hartford. They offer a free, no-obligation consultation in order to get to know your needs and offer you a tailored quote. Set up a time with a rental property insurance expert by filling out this short, online form.