A Quick Guide to Landlord Liability Insurance
This is our new guide to Landlord Liability Insurance, read now. Are you a new landlord or aspiring landlord? Did you know that landlords need more protection for their property than homeowners? Yes, insurance agents agree that property damage is higher when the house is on rental to a third party than when the owner occupies it. That's why most landlord policies are at least 25% more expensive than homeowners' policies. But, should you take up the landlord insurance in the first place? What is its scope? Let's explore all these questions and more below.
Demystifying the Landlord Liability Insurance Policy Coverage
Landlord insurance is a policy that protects homeowners from any loss or damage arising from renting their properties. Here, insurers assume that tenants and landlords have varying interests in the rental unit. Plus, the landlord does not always know the tenants on a personal level.
In turn, a tenant may engage in acts that can result in losses far much higher than the expected rental income. So, landlord policy bridges this gap by providing ample cushion for the owner's assets and building.
Homeowners' Insurance vs. Renters' Insurance vs. Landlord Policy Coverage
The homeowners' insurance applies when the owner resides in the said house. In turn, the policy will protect the owner from any liabilities or property damage arising while occupying the house. It pays for the building structure and assets in the home in the event the covered loss occurs.
Renters' or tenants' insurance is a policy that cushions the policyholder's belongings and liability. Further, it pays for the living expenses of the insured should the covered loss happen. Unlike the homeowners' policy and landlord policy, the tenants' insurance will not cover the actual building structure. Still, it may pay for loss or damage to structural alterations made by the tenant.
The Scope of Landlord Liability Insurance Policy Coverage
Landlord policy will cover the rental property from the following risks:
- Falling trees
- Wind and hail
- Water damage
- Injury to tenants
- Injury to guests
Different properties face different risks depending on their location, current value and condition, and the tenants' nature occupying the houses. In turn, landlords may need to take up additional coverage to consider the unique circumstances of the property. Hence, the following are optional coverage that property owners can include in their landlord policy:
- Vandalism (note that some Landlord Liability Insurance policies exclude vandalism coverage)
- Losses or damages arising due to wrongful eviction or entry, libel or slander charges, and personal injury
- Building codes and under construction coverage( paying for losses when the building is unoccupied due to ongoing construction)
- Rent protection (to cater for income loss due to an insurance-related event)
- Costly and unexpected emergency repairs
Every landlord should spare some time to understand with is included or excluded in their landlord policy. Otherwise, any drastic weather changes or allowing unpredictable tenants to occupy the houses may leave the landlord out of pocket. Typical landlord policy will not cover costs relating to:
- Losses or damages to tenants' belongings
- Damages to a rental property that is currently vacant for at least 30 days
- Losses or damages relating to nuclear, chemical, biological, or radiological attacks and war
Deductibles and Limits
Note that the landlord policy coverage is subject to deductibles and limits. Meaning, there is a certain amount that the landlords are to pay towards the covered loss before they can resort to the landlord policy to mitigate the cost. Likewise, there is an upper limit to how much the scheme will compensate for the covered loss. The landlord can set the deductibles, and limit amounts to provide the best cushion for the rental properties.
Types of Landlord Policy Coverage
There are two main types of landlord policy coverage as follows:
Property coverage cushions the landlord from damages to the actual building. Plus, it includes detached garages, sheds, fencing, or any other house extensions essential in maintaining the house's condition. This policy aims to repay the replacement costs and get the property back to its former state.
Landlord Liability Insurance Coverage
The landlord liability protection pays for medical bills or legal fees arising when the tenant or guest gets injured while at the rental premises. The injuries may be due to tenants or guests falling or tripping while at the house. Still, there must be sufficient proof that the landlord is liable for the loss. Unlike the property coverage, the liability portion of the landlord policy coverage has no deductible.
Do You Need the Landlord Policy Coverage?
What if you have an existing homeowner's insurance? It is best to get landlord policy coverage should you decide to rent out the home. Though not compulsory, the landlord policy will cover the added risks excluded by your homeowner's policy.
The rental property brings in a steady stream of passive income for landlords. But, letting strangers use the houses comes with its risks. In particular, there is more wear and tear when a building is rented out. A homeowner's insurance policy may not offer enough cushion for the damages or losses on your rental property. Then, consider getting the landlord policy coverage.
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