Renting your residential property can be a smart way to invest in your future. It can provide long-term income and cash flow, as well as tax perks. Your property will also likely appreciate over time, further adding to your investment portfolio.
However, being a landlord comes with risks, such as property and liability issues. Rental property insurance claims are bound to happen. But, you can mitigate or prevent these claims by understanding your landlord insurance policy and taking precautions to reduce their likelihood.
Topics Covered
Tip #1 – Landlord Insurance or Homeowner’s Insurance?
When purchasing landlord insurance coverage for your rental property, you will want to know how much it will cost.
The price will vary based on your specific risk factors and property; however, it’s handy to know that the national average for landlord insurance is $1,288 a year, or about $108 a month. To get an exact amount, you’ll need to contact an insurance agent. However, given that even a small claim can easily cost thousands of dollars, it makes sense for landlords to purchase this type of coverage.
You may also wonder what the differences are between your homeowner’s insurance policy and a landlord’s insurance policy.
Doesn’t your homeowner’s policy provide adequate coverage if you rent to tenants?
No, it does not.
Homeowners insurance only covers owner-occupied units. It also doesn’t provide enough coverage to meet your risk factors if you have to file a claim, and it doesn’t protect your tenants or issues arising as a result of their actions.
For example, many landlord insurance policies typically provide additional coverages for:
- Property damage caused by tenants, fires, weather, vandalism, and theft.
- Liability coverage to pay legal and medical costs if a tenant or guest is injured on your property.
- Loss of income if you lose rental income due to property damage.
Your standard homeowner’s insurance policy won’t cover these, so you must purchase landlord insurance to protect yourself from risk.
Another important risk to protect yourself from is loss of rent, which isn’t included in homeowner’s insurance policies. A tenant who moves out unexpectedly, stops paying rent, or damages your property can leave you having to pay out of pocket to cover your losses; these won’t be covered under a typical homeowner’s policy.
Loss of rent insurance is a great way to protect yourself from the unexpected. For example, if your property becomes uninhabitable because of a burst pipe or a tree falling on your roof—damages beyond your control—then loss of rent insurance can protect you from losing rental income while you make necessary repairs.
However, be aware that if a rental space is unoccupied at the time of damage, loss of rent insurance is unlikely to apply. There are also certain restrictions that you’ll need to talk to your insurance agent about as coverage varies among different policies and risk factors.
Tip #2 – Know Your Rental Property Risks
Every rental property is different, and therefore has a different set of risk factors that landlords—and their insurance providers—need to consider in their landlord insurance policies.
A house that’s been subdivided into several apartments will have different risk factors in the eyes of insurance companies than renting out a single room, or a family dwelling.
Consider the most common types of residential rental properties:
- Houses
- Apartments
- Condos
- Townhouses
- Mobile Homes
- Basement Suites
- Duplexes
- Rooms
The diversity among these various properties means landlords must obtain customized insurance quotes from their providers to assess and cover their risks adequately. For example, slip and fall accidents are more likely to occur in an apartment setting where a higher number of people move through shared spaces such as hallways, walkways, entrances ways, and laundry rooms than renting to a single person or family.
We recommend talking to one of our agents today to ensure you get coverage that meets your needs.
Tip #3 – Require Renter’s Insurance
One of the best things landlords can do to protect themselves and their properties is to require tenants to purchase renters’ insurance.
In fact, according to a recent Safe Home study, 75% of landlords require tenants to have renters’ insurance.
Why?
Because requiring your tenants to have renters’ insurance helps prevent claims against your insurance policies, ultimately keeping your costs down.
It’s not uncommon for renters to believe that a landlord’s insurance policy for the property covers tenants as well; however, this is rarely the case. While renters may not own the property they inhabit, it doesn’t mean they’re not liable for what could happen on your property.
Renters insurance can protect landlords and tenants alike. Landlords have the peace of mind of knowing they won’t be held liable for tenant losses. Renters are insulated from acts they may be liable for and protected from having to pay out of pocket in the event of a fire, flood, or other unforeseen disaster. The increasing frequency of natural disasters and weather-related events, and the rising cost of replacing personal belongings, make purchasing renters insurance a smart move for tenants; the benefits far outweigh the costs.
If you have questions about renters insurance, talk to one of our agents today.
Tip #4 – Common Landlord Insurance Claims
There are many things you can do as a landlord to reduce or mitigate the possibility of you or your tenant having to file an insurance claim. It starts with knowing what types of claims you will likely face as a landlord. After all, an ounce of prevention is worth a pound of cure.
#1 – FROZEN PIPES
Burst pipes and water damage can cause thousands of dollars of damage to your property and displace tenants. Severe seasonal weather is increasing yearly due to climate change, so it pays to be proactive about what you can do to protect yourself from frozen pipes and the resulting water damage.
Therefore, taking the following actions to maintain your property can help reduce your chances of having to file an insurance claim.
It’s important to know that your landlord insurance policies may not cover gradual damage due to neglect, so being proactive and catching small issues before they become big ones can save you significant amounts of money in the long run.
Indoor Precautions:
- Identify water pipes in exterior walls, ceilings, or basements that may freeze. If you think they could freeze, insulate them.
- Properly insulate water pipes.
- Check indoor water valves, sinks, and toilets, for leaks.
- Check attics, crawlspaces, windows, exterior doors, side walls, and other potential problem spots for penetrations.
- Check your heating system thermostats to ensure your building maintains a core temperature on the coldest days.
- Have a professional plumber inspect the condition of your plumbing systems annually.
Indoor Precautions:
- Shut off the water supply to outdoor water spigots, lawn sprinkler systems, and drain hoses as the weather cools.
- Check the condition of your exterior pipes. If you notice a dip in water pressure, it could mean your pipes are blocked. A professional plumber can troubleshoot any issues before the ground freezes, saving you money on repairs and avoiding the hassle of rental interruptions.
- Checking and cleaning out your drainage systems, such as gutters, roof drains, and other places where water flows away from your building, can help prevent water damage and ice dams.
- Clear debris like leaves and pine needles from sensitive areas such as HVAC equipment, gutters, and drains.
- Check your roof for loose shingles, rips, and damage.
- If you have a flat roof, clear it of debris like fallen leaves to help prevent puddling and deterioration.
#2 – FIRE
According to the National Fire Protection Association (NFPA), cooking fires are the leading cause of residential structure fires.
To protect people and property, you can provide tenants with safe cooking tips like this handy fact sheet from the NFPA.
#3 – VANDALISM
Intentional damage to your property, such as broken windows, graffiti, or electrical or plumbing systems that have been tampered with can be a real hassle and create an unsafe environment.
Bright motion-detecting lights can deter vandals from damaging your property, while security cameras can catch criminals. Vehicles can be easy targets for vandals and thieves, so it may be prudent to ensure that parking areas are monitored by cameras, as well as exit doors and windows that may be accessed from ground level.
#4 – SEVERE WEATHER
Severe weather events increase yearly, bringing down power lines and trees and battering your property with damaging hail and wind. Protect your property by storing outdoor fixtures and furniture safely indoors. Make sure your gutters, roof, and water drainage systems are in good working order as well.
#5 – SEWER BACKUPS
Sewer backups are often caused by an old plumbing system, tree roots, and blockages from improperly disposed sanitary products. Let your tenants know what can and cannot be flushed down the toilet or poured down the drain.
For example, tenants should never pour grease or oil down the drain because, over time, it will clog your pipes and cause serious plumbing issues. Instead, advise them to wait for cooking oil and grease to cool into solids and dispose of them in the trash.
To learn more about how to keep your plumbing systems in top-notch condition, read 25 “Must-Know” Plumbing Tips for Homeowners.
#6 – SNOW & ICE HAZARDS
Winter weather is notorious for creating slip-and-fall conditions. Icy areas and parking lots on untreated walkways are the landlord’s responsibility in most states. If someone slips and falls on untreated walkways, you could be liable since property owners must maintain their premises.
Being proactive about snow removal and treating icy problem areas could save you from an insurance claim.
Pro Tip: An Ice & Snow Removal log can help prove that you’re doing your due diligence as an owner in the event of an insurance claim.
#7 – TRIP HAZARDS
Landlords must take reasonable steps to repair uneven pavement, parking areas, potholes, and walkways to prevent trips and falls. Promptly repairing these hazards and providing proper lighting can help reduce the likelihood of an injury on your property.
Do you have the right landlord insurance coverage?
Renting your residential property can be a great investment that builds wealth over the long haul, but you must protect yourself against all reasonable risks. That’s where our insurance experts come in.
Our agents can provide a competitive landlord insurance quote today, so contact us to learn how we can customize your landlord insurance policies to meet your needs.
*Disclaimer: We offer content for informational purposes; Co-Op Co-operative Insurance Companies may not provide all the services or products listed here. Please contact your local agent to learn more about how we can help with your insurance needs.
Sources
Bob Vila. How Much Does Landlord Insurance Cost? https://www.bobvila.com/articles/landlord-insurance-cost/
Forbes. Slip And Fall Lawsuit Guide 2023. https://www.forbes.com/advisor/legal/personal-injury/slip-and-fall-lawsuit
Garon T Plumbing. 25 “Must-Know” Plumbing Tips for Homeowners. https://www.garontplumbingandheating.com/blog/2022/october/25-must-know-plumbing-tips-for-homeowners/
Insurance.com. Homeowners insurance vs. landlord insurance: What’s the difference? https://www.insurance.com/home-and-renters-insurance/coverage/homeowners-vs-landlord-insurance.html
Law Depot. A First-Time Landlord’s Guide to Renting. https://www.lawdepot.com/resources/real-estate-articles/a-first-time-landlords-guide-to-renting/?loc=US#.ZD_sYnbMKUk
Mavon Insurance. The Most Common Insurance Claims from Renters. https://www.mavon.com/the-most-common-insurance-claims-from-renters/
National Fire Protection Association. Cooking Safety. https://www.nfpa.org/-/media/Files/Public-Education/Resources/Safety-tip-sheets/CookingSafety.ashx
National Fire Protection Association. Top Fire Causes. https://www.nfpa.org/Public-Education/Fire-causes-and-risks/Top-fire-causes
SafeHome.org. 2022 Renter’s Insurance Industry Report. https://www.safehome.org/home-insurance/renters-insurance-market-report/
Visio Lending. A Beginner’s Guide to Landlord Rent Loss Insurance. https://www.visiolending.com/blog/a-beginners-guide-to-rent-loss-insurance