Matt Hands, VP, Insurance and MoneySense
Do you own an investment property? And do you consider yourself a landlord? If so, there's a special type of home insurance you need to purchase. It doesn't just protect your home from liability and damages; it can also protect your stream of rental income.
Rental income property insurance (also known as landlord insurance) is designed for these types of homes. Being a landlord comes with a lot of risks, and while it's supposed to make you some extra cash, that's not always the case. So be sure to protect yourself financially ahead of time with the right coverage on hand.
Loss of rental income
Extended contents insurance
Non-payment of rent
How much does landlord insurance cost?
The cost of landlord insurance can differ greatly, depending on the type of property you're invested in. For example, insuring a house may cost you $900 per year while a condo can cost you $400. Rates will also change for owner-occupied and commercial properties.compare quotes
Much like a conventional home insurance policy, there are a number of situations in which you won't be able to make a claim. These can include the following:
- General wear and tear
- Tenant belongings (they'll need renters insurance)
- Damaged caused by insects, termites, and rodents
- Intentional tenant damage and tenant theft
- Buildings under construction (you'll need builder's risk insurance)
- Earthquakes and landslides (unless you have added coverage)
While insurance companies are the ones that quote you, you can still take matters into your own hands to lower your landlord insurance rate – here, we cover eight different tips for cheap coverage.
Bundle insurance policies
Grouping your primary home's policy (or even your auto policy) with your landlord insurance under one provider often comes with great savings.
Increase your deductible
If you can afford paying a larger chunk of money out-of-pocket, increasing your deductible is one way to ensure you'll be paying a lower bill each month.
Double-check your coverage
Do you really need earthquake coverage if you're in a low-risk area? Look at your situation and consider what risks you're willing (or not willing) to take.
Maintain your property
Updating your rental home (e.g. roofing, plumbing, HVAC) can help lower your policy's rate. Insurers like to see low-risk properties.
Avoid minor claims
Having a messy claims history can raise your landlord insurance rate substantially. It's often a good idea to pay small expenses out-of-pocket, saving you in the long run.
Compare your options
Settling with the first insurer you come across probably won't get your the best rate – instead, take some time to research and shop the market with us today.
Looking for Airbnb insurance instead?
Long-term rental property insurance isn't the same as Airbnb insurance – short-term rentals often require their own specialized policy. Click the link below to learn more.
Is it worth getting landlord insurance?
Many landlords rely on the positive cash flow from their rental property. The peace of mind from knowing that your income will continue if an insured loss becomes a reality is absolutely worth its relatively low cost.
Does landlord insurance cover tenant belongings?
No, each tenant will require their own renters insurance policy to protect their own valuables. Rental income property insurance protects the major appliances in the tenant's suite that are owned by the landlord.
Does landlord insurance cover vacancy?
Not all landlord insurance policies include coverage for a vacant apartment. Many insurers do offer additional coverage for this exclusion, so be sure to peak with your broker.
Do landlords have to have insurance?
While there is no law mandating landlord insurance, your mortgage lender often requires it. And even if you're mortgage-free, it makes sense to protect a property that earns you income – saving you from headaches and financial fallout.
As a landlord, should I require renters insurance?
Stipulating a requirement for renters insurance on the lease agreement is a smart move for both the landlord and the tenant. This type of policy can help pay out claims related to the loss and damage of tenant contents, as well as take care of third-party liability suits. And if the tenant is unable to live in their rental due to an insured risk, it can also cover related living expenses, such as hotel fees.
This benefits the landlord in many ways, including:
- Paying your deductible if your renter is responsible for property damage
- Covering your renter's belongings because landlord insurance doesn't
- Avoiding costly legal fees as the renter will have their own policy to take care of claims, decreasing their likelihood of coming after you
- Potentially decreasing the cost of your landlord insurance as your risk is also lowered
- Giving you peace of mind for the low cost of about $20 per month
To learn more, read our blog: Should my tenants have renters insurance?
Is landlord insurance the same as home insurance?
While landlord insurance is a type of home insurance, it's not the same as a conventional home insurance policy. Rental income property policies are designed for the unique risks that come with leasing a unit. So make sure you have the correct insurance in place before listing your property on the market – if you don't, your claim will most likely be denied as regular home policies typically don't cover commercial-related activities.
Does landlord insurance cover tenant damage?
Yes, but the damage must be an insured risk and unintentional. For example, if your tenant accidentally burns down your kitchen, your policy will pay for the repair, provided you're also covered against fire. On the other hand, you won't be covered for acts of intentional damage, such as vandalism.