Rental Property Insurance for Landlords: Costs & Coverage
Rental property insurance protects a landlord’s property from damage and loss of income while guarding it against liability. Typically, an average policy on a $200,000 rental property runs from $1,283 to $2,432.
Obie is an online insurance broker that provides quotes for insurance for rental property in minutes. Enter details about the property you want to insure, and it’ll email you a free, no-obligation quote quickly.
Rental Property Insurance Costs
We received multiple quotes for the following regions. Every quote was for a $200,000 rental property with a $1,000 deductible, and none of the properties used for our quotes have added amenities like a pool. The premiums below represent the average of the quotes.
Insurance for rental property is usually 25% higher than a standard homeowners policy. As a business, the risks and costs are different than for homeowners. For example, homeowner insurance carriers don’t have to pay a loss of income if your roof needs to be replaced and don’t have to factor in the liability from multiple people temporarily living on a property.
Factors That Affect Rental Property Insurance Rates
Beyond the more obvious differences between landlord and homeowners insurance, other factors can affect the premium. Some of these include:
- Geographic location of your property
- Proximity to water
- Building materials, such as mason or wood frames
- Age and condition of your rental property
- Number of units you own
- Replacement cost of your investment property
- Installation of a security or fire suppression system
- Any amenity items, such as a fireplace or pool
When seeking a quote, be prepared to answer questions like these and others about the home and rental income.
Ways To Reduce Rental Property Insurance Costs
There are steps you can take which may help reduce the cost of your premium on your rental property.
- Install smoke detectors and a fire suppression system: Most providers will ask if you have one and consider your answer when developing the quote
- Make sure fire extinguishers are updated and well-placed: While this may not impact your premium, a well-placed fire extinguisher can go a long way toward preventing a claim
- Install a security system, and consider a monitoring service: Theft and vandalism are usually named perils in a landlord’s policy; while the security system doesn’t universally prevent crime, it may deter some from breaking in or vandalizing the property if cameras are present
- Reduce vacancy by only renting to long-term tenants: Vacant home insurance is additional coverage you can likely purchase for an added cost
Rental Property Insurance Coverage
Rental property insurance coverage is important if you own condos or an apartment building. It matters because landlord insurance provides coverage in multiple ways.
- Property damage: Your property is insured if it’s damaged by wind, hail, fire, or other named perils
- Liability: Along with property coverage, landlord insurance includes liability; if you fail to fix a leaky toilet and a tenant or guest slips and falls on the water and is injured, you could be liable for their medical bills
- Legal fees: Some policies cover legal fees to help you evict a troublesome tenant
- Rental income: If you lose rental income because the property needs to be repaired, rental income can supplement the loss
Most providers will have three different types of landlord policies available: DP-1, DP-2, and DP-3. The DP stands for Dwelling Policy, and the numbers correspond to varying levels of coverage, with DP-1 being the most basic and DP-3 being the most comprehensive but usually the most expensive.
This is a broad overview. The actual coverage and what isn’t covered depends on the policy you select and its named perils, definitions, and exclusions. With an agent or broker, review which policy and coverage are best for your business needs.
Tips on Purchasing Rental Property Insurance
The type of policy you’ll want, as well as the level of coverage, is going to depend on your business. The limits, coverage, and cost will differ if you own a condo unit or an apartment building.
- Get multiple quotes from different carriers before purchasing a policy.
- Don’t be afraid to ask carriers how they handle billing, if they have any grace period, and what happens if you purchase an additional property.
- Ask what the carrier’s process is for claims handling and the average turnaround time from filing a claim to it being resolved.
- Work with the agent to ensure the policy you’re looking for will match your business needs and cover any potential expenses you may encounter while renting out your property.
Note that each carrier has a different approach to assessing risk—some may find that issuing a building with a long-term tenant is less risky than insuring a homeshare property, such as Airbnb and Vrbo.
Whether you’re an established property owner or just getting into the rental property business, ensure you have the proper coverage by getting landlord insurance. Insurance for rental property covers your building, protects you from risk, and provides supplemental income when the property cannot be rented.
Obie is an online broker specializing in landlord insurance policies. You can get a free online quote for your property in a few minutes.