The Importance of Landlord Insurance

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February 24th, 2009

With today’s economic downturn, many homeowners may need to sell their houses. They may be unable to pay the mortgage, or they may just need to move because of a job offer in another city. Regardless, because loans are scarce and the housing market is saturated, they may not be able find a buyer. So more and more homeowners have to rent out their houses so they can make enough income to keep the loan current. Because lenders have made it more difficult to qualify for a home loan, it may be much easier to find a tenant than a buyer.

However, because so many homeowners have just lately become landlords, they do not have experience with rental properties. Relieved of the burden of having to generate extra money to pay the mortgage because a tenant’s rental payments will cover it, they may forget how important adequate landlord insurance will be to their financial security.

Landlord Vs. Homeowners Insurance

A typical homeowners insurance policy will cover the buildings, property, and contents of the home. It may also provide extra income to provide a place to live if the people who live there need to relocate while repairs are made. A landlord insurance policy will be a little different. It is specifically designed to cover the risks that a landlord takes when they rent out a home.

Coverage will vary by policy, this is a general outline of coverage your landlord insurance policy may include:

The Property - Landlord insurance will cover specified damages to the home itself. Roof repair, because of a hail storm, would be a common covered damage. Make sure you understand which damages your own policy will cover, because most do not cover floods from storms. A separate flood insurance policy must be purchased.
Contents Insurance - In general, landlord insurance does not cover personal property of the tenants. Many landlords require their tenants to purchase their own rental insurance policy as part of the lease requirements. But if a landlord keeps some of their own valuable property at the home, they should make sure that is covered. Some examples might be tools, ladders, or a lawnmower.
Loss of Income - If damages to the home make it unlivable, a policy can cover rental income until repairs can be completed.
Litigation - A policy can also help with legal expenses in case the landlord gets into a dispute with the tenant.

Other normal homeowners coverage, like temporary housing, should be covered by the tenant’s rental insurance policy, and not by the landlord’s policy.

Cash Value vs. Replacement Value

Losses may be settled by one of two methods. Cash value means that the policy would cover the damage according to its present value. In many cases, the home will not be worth as much on the market as it would cost to replace. Replacement value settlements take rebuilding costs into consideration.

Find Landlord Insurance

You can find landlord insurance from many qualified homeowners insurance companies. Use our free homeowners insurance quote forms to compare plans and rates in your local area.