Landlord insurance is designed to protect landlords financially as they operate a residential business. They avoid having to pay out-of-pocket expenses for building repairs and liability lawsuits. Landlords are given the option to insure the building and its contents, excluding the tenants’.
What Is Covered?
Landlord insurance covers the typical problems that affect residential buildings and their operations. Getting landlord insurance is not required by law but required by some mortgage lenders.
An average policy includes property insurance to cover the building along with coverage for fires, storms, explosions, thefts and damages caused by tenants. At the basic level, liability coverage covers the costs of accidents that occur on the property that may or may not be the landlord’s fault.
Each specific insurance policy varies in its range of coverage. The most common exclusions are damages caused by floods, earthquakes or sewage backups. Flood insurance can be purchased separately and is recommended for landlords who live in high-risk flood zones.
The property and contents of tenants are usually not covered under landlord insurance policies. Dissatisfied tenants have the option to sue their landlords. Liability insurance protects the interests of the tenants and the landlords.
Contents insurance covers the costs of the building’s contents, such as furniture or appliances, that may become damaged. Rent guarantee insurance provides for late or missing payments made by tenants who cannot pay their rent.
What Are the Limits?
Every landlord insurance company has limits to the amount that they’ll pay for each claim. One type of limit is determined by the building’s actual cash value. This value includes the accumulation of depreciated costs. The other type of limit is based on replacement value. This is the maximum amount of coverage, without depreciation, on your policy. This option includes age and condition requirements to qualify.