Landlord insurance is a special type of coverage designed to protect anyone who chooses to provide one or multiple properties for rent. Such policies generally include liability coverage, which protects you in the event that a tenant or guest sustains an injury on the property. If someone slips on an icy entrance outside of a rental unit, they may file a personal injury claim. This policy also typically covers claims resulting from damage to a property, including incidents of theft and vandalism.
Some policies may also cover damage resulting from natural disasters (floods, earthquakes, etc.), although some insurance companies offer this as an add-on if such events are common in the area; however, damages resulting from acts of terrorism are not covered by landlord insurance. This type of insurance is not to be confused with homeowners’ insurance, which only shields your personal items within your covered property. It’s also different from renters’ insurance, which covers personal items within a rental property belonging to the inhabitant but not the building itself.
As with any other type of protection, it is critical to ask the right questions before choosing a policy. Here are some key questions to ask before purchasing landlord insurance.
Is Landlord Insurance Mandatory?
Landlord insurance isn’t legally mandatory, but most insurers will highly recommend you acquire a policy, especially if you own several rental properties (condos, apartment buildings, etc.). This type of policy shields you against financial loss.
Is Landlord Insurance Tax-Deductible?
The short answer to this question is “yes.” Because landlords are considered business professionals, landlord insurance is deemed a business expense. Therefore, you can deduct your premiums.
How Much Does Landlord Insurance Cost?
According to ValuePenguin.com, a landlord insurance policy generally costs approximately 15 to 20% more than a homeowners’ policy, on average. Since the average cost of homeowners’ insurance is $1,288 per year, the average landlord policy may cost between $1,481 and $1,545 annually. The primary factors that affect landlord insurance premiums include the following characteristics of the property:
- Age and condition of the properties
- Number of properties
- High-risk features (e.g. wood fireplaces)
- Location (state, county, etc.)
Installing safety equipment such as motion sensors, sprinklers, and alarm systems could possibly reduce the amount of the premiums.
Is The Cost To Rebuild Or Replace My Home Covered?
Landlord insurance often has replacement cost valuation (RCV) for a given dwelling, which means the total cost to repair or rebuild the property may be recovered without factoring in depreciation though you are still responsible for paying the deductible. RCV is not available for certain types of landlord insurance scenarios: vacant homes, old vintage homes (pre-1920s), some mobile homes, residences with old roofs and homes in fire protection class 10 (located far from a fire station).
Is Loss Of Rent Covered?
Most landlord or habitational insurance policies cover loss of rental income due to tenants who can no longer afford monthly rent payments.
You may also be able to obtain coverage for incidents such as burglaries and vandalism, although this may cause premiums to increase. As with any other type of insurance, be sure to ask for multiple quotes from each insurer you contact and confirm what coverages are, and are not, included in a policy.
According to financial advice website Consumers Advocate, here are the average landlord insurance claim costs for each type of damage to a rental property:
- Water damage: $8,150
- Theft and burglary: $2,673
- Wind: $4,339
- Physical damage: $4,190
- Liability: $14,722
- Fire: $74,963
Speak To The Landlord Insurance Pros
Reach out to the experts at Pro Insurance Group in Illinois to learn more about what questions to ask before purchasing insurance. We are committed to serving as one-on-one advocates for each of our clients, regardless of their insurance needs. We always strive to develop and maintain strong relationships with all of our clients.
If you provide as a rental, one or more properties, you should obtain insurance covering all properties. Our policies include both liability and property damage coverage; therefore, you can be protected if someone is injured on your property or if any items are damaged due to theft, vandalism or natural disasters such as floods or earthquakes (if these are common in your area). A landlord policy will also cover any legal fees associated with these claims.
At Pro Insurance Group, we understand the risks associated with providing rental units and are dedicated to mitigating them. Whether you own a series of condominiums, apartments or two-family homes, we will work to protect you, your tenants and your investments.