Solved! What Does Landlord Insurance Cover?

Q: I just bought my first rental property and am getting ready to list it for rent. I know I need a landlord insurance policy, but I’m a little uncertain about what kind of protection the policy will provide. What does landlord insurance cover? And, more importantly, what is not covered by landlord insurance? 

A: The questions “What is landlord insurance?” and “What does landlord insurance cover?” are common from new and experienced landlords alike. Landlord insurance generally covers damage to the rental property from a covered peril such as a fire or windstorm. It also typically covers the landlord’s liability, such as if a tenant is injured on the property and initiates a lawsuit against the landlord, and loss of income after a covered peril makes it so the property is unable to be rented out while repairs are being made. Finally, landlord insurance may offer limited coverage for certain personal property belonging to the landlord. Landlord insurance and homeowners insurance are similar types of policies, but landlord insurance does not cover the renter’s property; that is generally covered by a policy from the best renters insurance companies.

Landlord insurance typically includes three main types of coverage for full-time rental homes: property damage, liability, and loss of income.

When answering the question “Do I need landlord insurance?” it’s important to understand how insurance companies define permanent rental properties. A landlord can generally only obtain landlord insurance if the rental property is being rented out on a full-time basis; owner-occupied and shared property arrangements are excluded. Therefore, if the landlord is living on the premises, even part of the time, then it is not considered a full-time rental property and would not be covered by landlord insurance. In this case, the owner would need to consider one of the best homeowners insurance companies or even look for specific policies that cover unique situations. For instance, if the owner rents out a room full-time in their primary residence or rents their entire home out temporarily as a vacation home via a platform like Airbnb or Vrbo, it would not be considered a full-time rental property and would need a specialized insurance policy to protect the owner.

When a property owner takes out landlord insurance for rental property purposes, they will typically be covered against property damage, liability, and loss of income caused by a covered event. These covered events are usually listed on the policy itself, and include such perils as lightning, fire, wind, hail, snow, and ice. These are just some common perils that tend to be covered under landlord insurance policies. It’s important for landlords to review their landlord insurance policies carefully to make sure they fully understand what is covered and what is not.

As an example, if a fire damaged the property to the point of being unrentable, a landlord insurance policy would cover the damage to the building, certain personal property that belongs to the landlord (such as kitchen appliances), loss of income while the property is being repaired, and any lawsuits the renter brings against the landlord related to the fire, and it could provide coverage in the event the renter sued the landlord for damages resulting from the fire.

Property protection generally includes dwelling coverage, other structures coverage, and certain personal property coverage.

Landlord insurance policies include dwelling coverage, which protects the structure of the rental home in the event it’s damaged by a covered peril. Landlord building insurance may also include “other structures” coverage, which would help protect any detached structures on the property, such as a garage, fence, or shed.

Landlord policies can also cover the landlord’s personal property, including appliances and yard tools, that is stored on the property for the renter’s use or for general property upkeep. The key here is that the personal property must belong to the landlord and be kept on the property specifically for the tenant’s use. Any appliances owned by the tenant would not be covered by landlord insurance.

For example, if a windstorm blows over a tree, which falls on a shed containing a snowblower, both the shed and snowblower may be covered by landlord insurance, but only if the snowblower belongs to the landlord. If the renter had purchased the snowblower for their personal use, it would not be covered by landlord insurance. But repair of the shed may be covered if the landlord insurance policy includes “other structures” coverage.

Landlord liability coverage may help pay for medical bills or legal expenses that occur if someone is injured on the property and the landlord is found to be liable.

A landlord insurance policy also generally includes liability coverage, which protects the landlord if they are found liable for an injury sustained on the property. The injured party could be the tenant, a guest of the tenant, or even a contractor doing work on the property.

For example, a tenant may be injured by a loose part of a ceiling falling on them, causing them to sustain a concussion. Alternatively, faulty electrical wiring could have started a fire that burned through the house and destroyed the tenant’s property or caused injuries to the tenant or a guest. Or perhaps a landscaper doing some work on the exterior of the property fell down some stairs that were in disrepair that the landlord had failed to fix. Landlord liability insurance can cover the legal fees associated with these types of situations, and it may also help pay for the injured person’s medical expenses.

Landlord insurance can also cover loss of rental income if the property is damaged in a covered event and the tenants must move out.

Damage to a rental property can cause a loss of income for the landlord. For instance, if the property was damaged in a fire, the tenants would have to live elsewhere either permanently or temporarily while the repairs were being made. That would in turn mean that the landlord would lose out on that rental income while the property was uninhabitable during the repair phase.

Luckily, a landlord insurance policy can offer coverage for loss of income in this situation. However, it’s important to note that landlord insurance will not cover a situation where a renter forgets to pay or is late making a payment. The landlord may be able to purchase additional coverage to help out in this type of situation.

Landlord insurance does not cover the tenant’s personal property; that is covered by renters insurance.

Landlords and renters can get confused about whose personal property is covered by landlord insurance. The simple answer is that landlord insurance does not cover the renter’s personal possessions. That’s why landlords often encourage or even require tenants to carry renters insurance as part of landlord policy.

To explain how landlord insurance works when it comes to personal property, let’s go back to the example of a tree falling on a shed. Landlord insurance would cover the shed if it was an insured structure on the property, as well as any items left for a tenant’s use that belonged to the landlord, like a lawnmower, snowblower, or weed trimmer. However, if the shed also contained items belonging to the renters that they brought onto the property, like a bike or stroller, that would be covered by renters insurance. In general, it’s recommended for renters to purchase insurance even if it’s not required by their landlord.

Landlord insurance generally won’t cover repairs to large appliances like a dishwasher or furnace, but a home warranty may.

Like homeowners insurance, landlord insurance typically doesn’t pay for repairs to major systems in the home. For instance, if there was a major breakdown in kitchen appliances, water heaters, furnaces, or air conditioning, landlord insurance would likely not provide coverage to repair or replace these items. Insurance also does not proactively help make repairs before damage happens, but a home warranty can.

To get more comprehensive coverage, landlords may consider purchasing a home warranty for their rental property. A home warranty is a service agreement that covers the repair or replacement of major household items or whole-home systems. However, landlords should carefully read the full service agreement before signing, as there may be exclusions. Common exclusions from a home warranty agreement may include large systems like plumbing or heating, which can require additional coverage. Some home warranties may not cover replacements, only repairs, which would mean the landlord would need to pay out of pocket when those appliances finally reach the end of their life.

Landlords can choose to add extra coverage to their insurance policy for well-rounded protection against a variety of situations.

Another feature of landlord insurance is that landlords can choose a variety of add-ons, additional policies, floaters, or endorsements that help protect their property in certain circumstances. There are various added coverage types that can help protect landlords more fully. These options can also affect the landlord insurance cost, which can vary by the expense of what is insured. In general, how much is landlord insurance? That depends on many factors, including the size and location of the home, the age of the home, and the crime rate in the area. Additional coverage can add to the cost as well.

Properties located in certain high-risk areas may require a flood or earthquake insurance policy in addition to the landlord insurance policy. Landlords may also choose to take out additional protection against burglary or vandalism, or for when a property is undergoing renovations or vacant; situations which are often excluded under standard policies. Landlords may also choose to purchase a personal liability umbrella insurance policy, which is additional insurance that can extend coverage beyond the limits of a standard insurance policy.