What Does Landlord Insurance Not Cover? A Guide to Coverage and Its Exclusions

Discover what standard landlord insurance policies include and what supplemental coverage is available to protect yourself and your property.

By
Nichole Stohler
|
Last Updated
November 24, 2023
What Does Landlord Insurance Not Cover? A Guide to Coverage and Its Exclusions

As a landlord, you know unexpected problems can arise. Imagine getting a call that a sewer back-up flooded the basement of your rental property, damaging carpets, drywall, and furnishings. As you survey the mess, besides being knocked over by the smell, you wonder: Will my landlord insurance cover this?

While standard landlord insurance provides valuable coverage, you should understand where there are gaps. In this article, we’ll first look at the key protections included in a standard landlord policy. Then, we’ll explore areas that are typically not covered and how you can supplement your coverage.

Knowing what standard landlord insurance includes and excludes can help you decide how to safeguard your real estate assets. Recognizing where standard policies fall short enables you to customize coverage that completely protects your valuable investments.

What is landlord insurance?

Landlord insurance serves as a financial safeguard for rental property owners, covering costs to repair or rebuild damage to your properties caused by perils like fire or storms. Policies also typically offer liability coverage, helping pay for a tenant or guest's medical bills or legal expenses should they suffer an injury on the premises.

Landlord insurance offers peace of mind, as you know your hard-earned real estate investments have an extra layer of security.

What does landlord insurance cover?

Standard landlord insurance policies generally cover damage to your property, liability claims, loss of rental income, legal expenses, and personal belongings. Let's look at the details of these key coverages so you know exactly what protection a standard policy offers.

Property damage

Landlord insurance protects against unexpected events that damage the rental property itself, such as fire, severe weather, vandalism, or theft. For example, if a kitchen fire damages your rental property, this coverage can help pay for the rebuilding costs caused by the fire and smoke damage.

Liability protection

Liability protection is a key component of landlord insurance. This coverage helps pay for expenses stemming from bodily injury claims, including:

  • Medical bills for the injured party: Takes care of ambulance fees, hospital visits, medications, or ongoing treatments.
  • Legal defense fees: Pays your lawyer's fees if you face a lawsuit related to the incident.
  • Settlements or judgments: Covers compensation you're legally required to pay the injured party.
  • Pain and suffering damages: Some policies may cover additional payouts for intangible suffering.

Some policies also cover personal injury beyond physical harm, including libel or slander claims.

Loss of rental income

A major disaster can render your rental property uninhabitable. And when tenants can't live there, you can't collect rent. To combat this disruption to your income, many landlord insurance policies include loss of rental income coverage. This provision helps reimburse you for missed rental income while your property is being repaired.

The specifics of each policy differ across insurance companies. Make sure you understand exactly what your landlord insurance does and does not include by reviewing your unique coverage.

What does landlord insurance not cover?

While landlord insurance provides valuable coverage, there are certain items it does not cover, such as:

Tenants' personal property

Standard landlord insurance does not cover possessions owned by the tenant, including furniture, clothing, and electronics. To help ensure renters have protection over their personal belongings in case an accident happens, many landlords require their tenants to purchase renters insurance. Renters insurance reimburses any damage or loss of a tenant's property.

Tenant negligence

If your tenant fails to report a small issue, like a leak, and it eventually leads to significant damage, like burst pipes, landlord insurance may not cover the repairs. To avoid costly issues, landlords should urge tenants to promptly reporting any issues -- utilizing an efficient maintenance request platform can make this process easier for everyone involved.

Normal wear and tear

Landlord insurance does not typically cover the normal wear and tear that occurs naturally over time in a home. This includes paint chipping, carpet fading, or appliances breaking down due to regular use.

Intentional damage

If a tenant vandalizes walls, rips a door off of the hinges, or causes any other sort of deliberate destruction, it won't be covered by landlord insurance. You may seek legal action or rely on a security deposit for reimbursement.

Floods and earthquakes

Most basic landlord insurance does not include protection against flood or earthquake damage. Consider purchasing additional coverage specifically for these risks if your property is in an area prone to these natural disasters.

Review the terms and exclusions of your landlord insurance policy to understand what is and isn't covered, and consult with your insurance provider if you have any questions.

Optional riders for landlord insurance

Beyond standard coverage, optional riders can customize your landlord policy for your unique risks. Like choosing upgrades and add-ons for a new car, riders let you enhance your coverage.

While riders come at an added cost, they may be worthwhile for protection against common landlord headaches, including:

  • Lost rent: Get reimbursed for lost rent if a tenant stops paying. This comes in handy if you need to evict or when there’s a gap between renters.
  • Vandalism: Have repairs covered if destructive tenants or others intentionally damage your property.
  • Water damage: Protects against leaks, flooding, and burst pipes ruining walls, floors, and furnishings.
  • Sewer backup: Be financially covered if a clogged drain spews sewage, which can be an unpleasant and costly mess to fix.
  • Ordinance or law: Have code upgrade costs covered if older properties require expensive repairs to meet new requirements.
  • Equipment breakdown: Fix or replace furnaces, AC units, and appliances that unexpectedly break down.

Carefully weigh if these risks are frequent or severe enough in your rental property to justify the riders’ costs.

Other types of rental property insurance

In addition to standard landlord insurance, there are a few other types of insurance you might want to leverage to protect your rental property fully:

  • Umbrella policy: An umbrella policy offers additional liability coverage that goes beyond the limits of your standard landlord insurance. If a major incident occurs and the damages exceed your primary insurance coverage, your umbrella policy will kick in to cover the rest.
  • Flood insurance: Standard landlord insurance usually does not cover damages caused by floods. If you live in an area prone to floods, consider purchasing flood insurance, as it will help cover the costs of repairing flood damage.
  • Earthquake insurance: If you live in a state at risk of experiencing earthquakes, such as California, you'll want to think about getting earthquake insurance to accompany your regular landlord insurance plan.

How much does landlord insurance cost?

What you'll pay for landlord insurance depends on a variety of elements, but on average, the annual premium for landlord insurance is around $2,100 per year. It's important to get personalized quotes from insurance providers to know the exact cost for your property.

Landlord insurance does come with a price, but it can help protect your investment and provide peace of mind, making it a valuable expense for many landlords.

Variables that affect landlord insurance costs

Several factors can influence the cost of landlord insurance. Here are some details to consider:

  • Location: Your premium can be affected by factors like your neighborhood's crime statistics, risk of natural disasters, and distance to first responders.
  • Property type: The type of property you own, whether it's a single-family home, apartment complex, or condominium, can affect the cost. Property types have different risk profiles, leading to variations in insurance pricing.
  • Coverage limits: Your coverage for your landlord insurance policy has the most influence on the cost -- higher coverage limits result in higher premiums.
  • Deductible amount: The deductible is your out-of-pocket cost before the insurance coverage kicks in. Higher deductibles can lower your premium, but choose a deductible you can comfortably afford.
  • Claims history: If you've made previous claims or have a history of incidents on your property, insurers may consider you a higher risk, which can lead to higher premiums.

Landlord insurance policy coverage

As a landlord, review what your insurance policy covers and what gaps may exist. Standard landlord insurance provides fundamental protections like property destruction, liability claims, and loss of rental income.

However, pay attention to gaps in your coverage like flood and earthquake damage and wear and tear to avoid finding yourself in a financially vulnerable position.

Consider requiring renters insurance, adding supplemental coverage riders, or taking other steps to fill gaps and customize your policy. While standard insurance delivers key safeguards, recognizing exclusions enables you to tailor optimal protection.

What does landlord insurance not cover FAQs

Is landlord insurance the same as a homeowners insurance policy?

No, they are not the same. Landlord insurance protects rental properties, while homeowners insurance covers properties you live in.

Does the law require landlord insurance?

The law does not usually require landlord insurance, but it's a wise choice to protect your real estate investment and limit financial risks.

Azibo Insurance Services LLC f/k/a Zibo Insurance Services LLC, a wholly owned subsidiary of Azibo Inc., is a licensed insurance producer. Contact us to discuss your specific insurance needs.

Disclaimer: The information provided in this post does not, and is not intended to, constitute insurance advice; instead, all information, content, and materials are for general informational purposes only. This content may not constitute the most up-to-date insurance information. Readers must contact a licensed insurance agent or company to obtain quotes, advice, and guidance with respect to any insurance matter. No reader, user, or browser of this article should act or refrain from acting on the basis of information herein without first seeking the advice of a licensed insurance producer.

Nichole Stohler

Nichole co-founded Gateway Private Equity Group, with a history of investments in single-family and multi-family properties, and now a specialization in hotel real estate investments. She is also the creator of NicsGuide.com, a blog dedicated to real estate investing.

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