Property owners renting out their house for the first time might think their home insurance will pay for any repairs or replacements necessary in case of a fire, flood, or another calamity. You're making a novice error there.

Reasons Why Landlords Should Have Insurance

Your insurance likely covers only the properties in which you live. Coverage will be voided if you begin renting to others.

However, tenants are often not held accountable for damages when significant appliances break down, a person is injured on the property, destroys your home, or criminals empty the premises.

The solution to this problem is landlord insurance. These plans can be found in a wide variety of forms. Think about what needs fixing or protecting before looking at rental property prices.

To What Extent Does Landlord Insurance Protect You?

Three main components should be included in any decent landlord insurance policy:

Physical Loss

Insurance protection in case of damage to the building or its contents caused by earthquakes, floods, fires, electrical failures, careless renters, and vandalism. Replacement cost, rather than actual cash worth (mainly if fixtures and furnishings are old) or a certain amount of money, is what you should aim for with your insurance coverage.

Rental Default/Lost Income Insurance

If something renders your property completely unusable, this benefit will pay you for the rent you would have collected had your renters been allowed to stay there.

Responsibility Shielding

Tenant and visitor injuries caused by ice pathways, structural collapse, or a wild swarm of bees are covered under this policy, as are any resulting medical and legal expenses. Underwriters may also use the designations DP-1, DP-2, and DP-3 to categorize the various packages they cover. The abbreviation DP refers to a person's "personal residence." They all denote different tiers of protection, with DP-1 being the most fundamental and DP-3 the most extensive.

Coverage Expansion

Landlord insurance plans can include a variety of standard riders. They are less crucial than the requirements above, yet they may be helpful and save you money.

Guaranteed Income Protection Insurance

This protects the owner in case the renter misses or underpays rent.

Flood Insurance

Suppose your rental property is in a flood plain. In that case, you should consider purchasing separate flood insurance because most standard best landlord insurance plans do not cover the flooding caused by natural catastrophes or municipal plumbing.

Emergency Coverage

When a renter needs you to come out to fix a broken dishwasher or because they were locked out of their home, this tool can reimburse you for your time and transportation expenses.

The Cost of Extra Building Materials

To put it another way, this will pay for the price tag of bringing a damaged structure up to code.

How Much Does It Cost To Get Insurance For A Landlord?

As of July 2022, the average cost of homeowners insurance was $1,899, according to Policygenius. However, this number can vary widely depending on factors such as the location and age of the insured property.

According to the free real estate investment tracking website Stessa.com, landlord insurance on the same property can cost as much as 15% more due to the increased risk of damage and incident. Your premiums will go down directly to the years you use the property.

Houselogic.com, an instructional website sponsored by members of the National Association of Realtors, states. "If you rent out your house for only 12 weeks instead of the whole year, you should expect to spend roughly double in annual rates." The argument for this practice is that transient renters are less likely to report maintenance problems.

They may need to be more careful and familiar with the house's infrastructure, such as the plumbing, load-bearing structures, and electrical wiring. All of this can raise the stakes for the insurer and the likelihood of problems occurring. 4

The Bottom Line

If you're considering renting out a house, reviewing your homeowner's insurance beforehand is a good idea. It would be best if you didn't count on it to pay for repairs or legal fees while away. Landlord insurance is essential if you want to rent out your house. A renter's insurance policy can help ensure that your renters' belongings are protected in the case of an accident.