Do You Need Landlord Insurance For a Rental Property?
If you thought being a landlord was just stopping by to collect the rent payment every month, you’d be mistaken. Landlords have additional responsibilities from regular homeowners since they don’t live on the property but they’re still responsible for what happens there. Most likely, a specific landlord insurance policy will have to be purchased since home insurance only covers the property when you live there (terms vary between companies). Of course, if you’re only renting out a room but still living in your home, you probably won’t need to purchase another insurance policy since your home insurance should adequate.
The liability risks for landlords are different than for traditional homeowners. If a landlord doesn’t properly maintain the property, they can be held liable for any tenant injuries or illnesses that occur due to their negligence. Even if certain safety or environmental hazards contributed to the injury or sickness of a tenant, it will be the landlord who is held accountable.
A landlord can request certain maintenance practices that are required of the tenant to ensure compliance to health and safety codes, or specify that a tenant reports a major issue in 24-48 hours so damage can be minimized. These terms can always be added later as an addendum to a written contract, but it’s usually easiest and best if it’s outlined from the beginning.
Although home insurance does cover injuries that occur to visitors at your home, since a tenant is living on the premises, there will be more opportunities for accidents or mishaps to arise, and you may want additional coverage in addition. Landlord insurance isn’t just supplemental; it also offers coverage for things that aren’t under the home insurance policy. One notable difference is fair rental income protection, which isn’t needed by homeowners, but would be a valuable coverage to have as a landlord. Fair rental income protection offers the reimbursement of lost rental income if the residence is temporarily unavailable from risks covered under the policy.
Because landlord insurance offers more protection in some ways than normal home insurance, it reflects that in pricing. The average premium in 2011 was $978, which was about 25% more than a home policy. However, neither type of insurance would cover the costs of replacing a tenant’s belongings and clothing, so you may want to suggest that they consider renters insurance.
As a landlord, if you’re not keeping the house up to code and making sure it’s safe, you could lose your insurance policy, so it’s critical to have periodic check-ups and regular maintenance to address any issues, especially safety concerns. It’s suggested that before a new tenant moves in, a house inspection be ordered so the landlord can identify and quickly handle any issues. If you do find something and file a claim, be sure to promptly repair it, otherwise if the issue develops and becomes a bigger problem, you may be dropped from the policy. You can also expect that there will be inspections or check-ups from the insurance company so they can report back on any significant problems. If they find a major issue that is not being quickly addressed, it gives them grounds for canceling the policy on the landlord.
Being a landlord can have its financial perks as a primary source or an additional stream of income, however, the role shouldn’t be taken lightly. A smart landlord will make sure to protect their property and look out for the well-being of their tenant by maintaining a safe and clean home, otherwise the consequences could become serious and costly.
Are you thinking about becoming a landlord? Feel free to share your thoughts and experiences in the comments section below.