What is Landlord Insurance? What Rental Property Owners Need to Know

Your neighbor trips on your front porch during a BBQ and breaks their leg. A tenant accidentally drops a cigarette and burns a hole in the couch that you provided to the unit, requiring a repair. A hailstorm damages your roof, causing a leak that means you must put up your tenants in a hotel for a week. 

Of course, no rental property owner wants to experience any of the above scenarios. But the truth is, events like these can’t always be avoided. That’s exactly why landlord insurance exists. 

Whether you’re a seasoned rental property owner or first-time investor, landlord insurance is essential. Here, we’ll break down what it is, why you need it — and how to make sure you get the right coverage at the right price. 

What is landlord insurance? 

Simply put, landlord insurance serves to protect your investment in rental properties — this way, you won’t have to pay out of pocket if something bad happens such as property damage or injury. 

While homeowners insurance covers personal residences (policyholders typically reside on site at least part of the time), landlord insurance covers rental properties that are primarily occupied by tenants. 

Today, most mortgage providers require insurance in order for landlords to secure a loan. Even if you own your house outright (i.e., you purchased it in cash without a loan), it’s still a good idea to get landlord insurance and protect yourself against financial loss.

How much does landlord insurance cost? 

Landlord insurance typically costs about 20% more than homeowners insurance. According to NerdWallet, the average cost of homeowners insurance in the U.S. is about $1,631 a year. This would mean the average landlord premium is approximately $1,957 a year.

That said, many Azibo customers pay annual premiums well under $1,000 for landlord coverage. Your specific premium will depend on a number of factors including geographic location, property condition, and claims history. It also depends on a few factors that are generally in your control, such as your desired coverage and deductible. 

Take geographic location, for instance. “Every place in the world has an exposure to some type of catastrophe, but some areas are more prone to certain types,” explains the NAIC in their 2020 Owner’s Insurance Report. “Brush and forest fires are more common in the West. Hurricane exposure is greater in areas near the Gulf of Mexico and the Atlantic Ocean. Exposure to tornado damage is greatest in the central and southwestern United States, even though tornadoes can and do occur in nearly every state. Earthquake exposure also exists throughout the country because seismic faults are located in all regions.” 

Of course, locations with higher incidences of natural disaster will have a higher premium — but don’t let pricing deter you from properly insuring your rental properties. In 2020 alone, natural disasters cost the U.S. $95 billion in damage. As a landlord, you have two options: Prepare for the worst with comprehensive coverage, or pay out of pocket if disaster does strike. 

What does landlord insurance cover?

Most standard landlord insurance policies include property and liability protection, plus additional coverages that cater to specific scenarios. Property protection can help cover the costs of property damage caused by events like fire, lightning, explosion, hail, or vandalism. Meanwhile, liability protection can cover legal, medical, and settlement expenses in the event that a guest gets injured on your rental property. 

On top of that, the average landlord insurance policy can also provide coverage for additional structural damage (e.g. to fences, sheds, or unattached garages), damage to the landlord’s personal property (e.g. to furniture, art, or stored items), smoke damage, vehicular property damage, water and sewer backups, and even loss of rent in the event that your property becomes uninhabitable due to damage.

The five main property coverages for a landlord policy include: 

• Dwelling (the actual structure, not the land)
• Other Structures (fences, sheds, gazebos, unattached garages, etc.)
• Personal property (of the landlord, not the renter)
• Loss of rents 
• Additional living expenses (costs of putting your tenants up in a hotel or boarding animals if the dwelling is uninhabitable)

For liability coverages, there are two primary types: 

• Liability (which covers legal liability of the insured for costs of bodily injury and property damage)
• Medical payments to others (including coverage for medical bills of others)

Additional landlord insurance policies to consider

You might assume that your policy automatically covers earthquakes and floods, but it most likely doesn’t! Those are separate policies you must purchase in addition to your property and liability coverage. In fact, based on your location, weather, and bank requirements, you might \ consider purchasing these additional landlord insurance policies: 

• Earthquake insurance. In California, home insurance companies are legally required to also provide earthquake coverage — and for good reason, considering an earthquake strikes every three minutes in the Golden State. If your rental property is located near an area prone to earthquakes, keep this insurance policy on your radar to protect against potential property damage.
• Flood insurance. 90% of all natural disasters in the U.S. involve flooding — and according to the Federal Emergency Management Agency, just one inch of floodwater can cause up to $25,000 in damage. Given these statistics, it’s no wonder many landlords get flood insurance policies to prevent financial loss. Learn more about flood insurance. 
• Terrorism insurance. In the wake of the 9/11 attacks — which caused over $27 million in insured property loss — Congress introduced the Terrorism Risk Insurance Act, requiring all U.S. insurance companies that offer property and casualty coverage to also offer terrorism insurance. The NAIC points out that while terrorist attacks are not limited to a particular geographic region, they have historically occurred in larger urban areas.

Beyond exploring these policies, landlords can also protect themselves — and avoid potential liability claims — by requiring that tenants purchase their own renters insurance.

How to choose the right landlord insurance coverage

While some states and zip codes require minimum coverage or certain policies, for many landlords, choosing insurance is up to your own preferences. With so many insurance carriers, plans, and policies to choose from, it can be difficult to determine which one is right for your rental business. Here are two simple steps for getting started:

Build trust with your agent 

After you share property information with a national agency or direct carrier, an insurance agent will put together a personalized quote package and recommendation. From there, you’ll work together to customize the quote to your specific needs. During this process, transparency and trust are paramount. Be sure to keep clear lines of communication, asking questions as they arise so your agent can steer you toward the best plan possible for your rental business. 

Consider your risk tolerance 

When weighing different coverage options, it’s important to ask: What makes the most financial sense for me? For instance, some landlords may choose a high-deductible plan — saving on your premium up front, but paying more out of pocket if something bad happens to their property down the line. In contrast, other landlords may opt for a low-deductible plan — getting more coverage, but paying higher premiums in the process. 

Learn how Azibo can help you get the right coverage at the right cost

Commercial property insurance policies are notoriously lengthy, full of financial jargon and legalese that landlords may not have time to read because they’re focused on closing the deal. Here’s how one landlord explained his experience: 

“My insurance broker told me there were two options and recommended the most expensive one because it gave the best coverage. I needed to get my deal closed so I went with his recommendation and haven’t had time to revisit it.” 

At the same time, institutional real estate investors benefit from insurance consortiums that give them access to lower rates and increased efficiency. This creates an unfair advantage for large investors and makes it difficult for independent landlords to be competitive. 

There was a clear opportunity to improve the insurance experience for independent rental property owners — and that’s where we stepped in. Committed to enhancing the landlord experience, Azibo is the only national online commercial insurance platform focused solely on independent landlords. We’re proud to provide landlords with access to a curated set of high-quality insurance carriers — helping you get the right coverage, at the right cost. 

Unsure which insurance carrier to contact? Azibo has got you covered. First, answer a few short questions about your property or portfolio of properties. Then, we’ll send you a quote in as fast as a couple minutes from the most reputable carriers in the market. You can speak with a dedicated Azibo agent to review your quote and better understand terms and pricing. Our team will then work with you to adjust the coverage, and guide you through the purchase of the policy when you’re ready.

Put insurance headaches and hassles in the past.

Get your free landlord insurance quote today. 

Learn about Azibo Insurance Services

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.

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