When you are in the insurance business for over 25 years you start to see a common line of questions that will likely happen.
One of these questions that are sure to be asked when talking to a first time landlord is whether there is really a difference in homeowners insurance and landlord insurance.
In this article, we’ll cover:
Landlord Insurance vs. Homeowners insurance
landlord insurance coverage for multiple rental properties
Typical landlord insurance costs
What the best landlord insurance companies are
Let’s dive into it.
Also Read: 15 Types of People Who Need Umbrella Insurance
Is Landlord Insurance More Expensive than Homeowners?
Yes, landlord insurance is typically more expensive than homeowners insurance by up to 20%.
For example, if you own a home that has a homeowners insurance policy that costs $800 per year, expect to pay somewhere around $1,000 per year for landlord insurance.
We’ll cover why the cost goes up a little later.
Most people who ask this question are trying to avoid spending more money on insurance than they are used to, which unfortunately means that they are likely asking the wrong question.
The right question would be “is there a difference between landlord insurance and homeowners insurance coverage?”
Landlord Insurance vs Homeowner Policy
Let’s say you are moving your family into a new house and keeping your last home as a rental property.
You have been paying homeowners insurance from the time you bought that first home. Now that you are getting ready to rent the house you are wondering what the difference is between homeowners insurance and landlord insurance.
First, let’s dive into homeowners insurance coverage.
Homeowners insurance is usually only made to cover owner occupied, single family residences. These policies typically just cover the homeowner if their house burns down, or if they need to cover medical or legal bills when someone is injured on their property.
Most of these policies will also cover an occasional short-term rental but if you rent it out on more than just a couple of weeks per year, you may want to consider getting landlord insurance coverage.
What Does A Landlord Insurance Policy Cover?
Landlord insurance is a much better option for someone who plans to rent their property for full time…
But, before you just go buy landlord insurance you need to know what it covers and what will not be covered.
Landlord insurance policies typically cover:
This is what is typically covered in a basic landlord insurance policy but if you want to make sure you’re covered in as many areas as possible then you may consider adding optional riders to cover things such as:
This additional coverage will help you prevent having to come out of your own pocket to pay for unexpected emergencies that could arise.
*Note: These types of coverage are great for the landlord, however, they do not help the tenant cover their own personal property. That is why it is important to require renters insurance and to see a copy of the tenants policy.
Other Landlord Insurance Policy Types
Outside of a general landlord insurance policy that you will need to cover any rental properties you may own, it would be wise to consider getting a few other types of optional insurance coverage.
You may also want to consider owning your rental properties under an legal entity like an LLC to help further protect yourself from liability.
Landlord Insurance Coverage For Rental Properties
For the real estate investor that owns 10 units and up there are a few more things that have to be considered from the beginning.
Real estate investors who own 10+ units will have to deal with emergency repairs, vandalism and tree removal on a more consistent basis than someone who owns less property.
They will need to consider protections that help them cover short term vacancy and short term rentals more often simply because they can’t afford to spend so much time on these issues because of the size and scale of their rental property business.
Typical Landlord Insurance Cost
So now that we have covered the many different aspects of landlord insurance you can most likely see that the typical price of landlord insurance coverage varies because of the amount and different types of liability a landlord will face and also how often they are likely to face it.
Now, lets look a a simple example to see how much a typical landlord insurance policy costs.
Let’s say that you own a $200,000 single family home that you want to rent out that with mortgage, Taxes and homeowners insurance ($104 per month) comes out to about $1,291.
In the basic example given at the beginning of the article, your new insurance policy would end up being around $125 per month ($1,500 per year) on the high end of the estimate. That’s not really a huge jump.
This raises your monthly mortgage payment to $1,312 per month.
You find a tenant who is in the military and just got stationed here and wants to find a comfortable home she and her family can stay in for the next 3-5 years. She is willing to pay $1,500 per month.
This scenario means that you will receive just under $200 extra per month. As you can see, there is no real cause for concern here.
Let’s see another scenario
Johnny owns a triplex and want to plans to rent it out. The property is located in a decent part of town but the area has had a few vandalism issues in recent years.
Johnny wants to cover his triplex with more optional riders to insure the property from vandals, burglary and other issues. Plus, he want to get an umbrella policy to make sure he is covered in case someone is injured on the premises.
Johnny gets an insurance quote that show that his premiums will be $2000 per year, which sounds like a lot of money until Johnny does the math.
He realizes $2,000 per year for a triplex end up only costing $667 per unit each year, or $56 per unit per month.
After all things are considered, Johnny realizes that his mortgage, taxes and insurance only end up costing him $1854 per month while his total monthly rental income end up being $3,300 and puts an extra $1,446 in his pocket each month.
As you can see from these two examples, the cost of landlord insurance is not as important as the net income of the property.
Plus, when you consider just how much it would cost if either of these cases got just one liability claim against them the cost becomes negligible.
One thing that is important to remember is that each insurer offers something different based on the types of insurance they focus on and want to cover, which is all based on the amount of risk they are willing to tolerate.
Therefore, here is a quick list of the best insurance companies for landlord insurance
Best Insurance Company For Landlord Insurance Policy
If you would like to get a landlord insurance policy quote call us immediately at 1(888)258-8808 or get an online quote here.