Are You A Landlord Do You Have The Property Insurance Coverage

Dated: 09/11/2015

Views: 621

Are you a landlord? Do you rent out rental properties to tenants? If yes,then you need a specialized form of insurance called landlord insurance. Otherwise, you’re taking on some serious financial and legal risks that almost nobody can afford to bear.

We’re not saying this because we’re on the payroll of an insurance company. We just have a healthy understanding of the real-world things that can go wrong with rental real estate, and how the legal system often assigns liability. Careless landlords are frequently torn apart limb from limb in bankruptcy courts to extract damages that would otherwise be borne by landlord insurance.

Your standard homeowners insurance won’t cut it. If that’s all you have, and a tenant sues you, your world can still fall apart.

Still not convinced you need landlord insurance? Here are eight reasons why you should change your mind.

1.Homeowners insurance claims are often denied if the property has along-term renter

If you’re habitually and regularly renting your property, and/or you are no longer the full-time resident, you are endangering yourselfand your financial well-being if you do not put the proper landlord insurance coverage in place.

Check with your carrier for specific exclusions. Some are more tolerant of short-term/vacation/occasional rentals than others. Be aware that renting your property over a month per year will likely prevent your homeowners insurance policy from giving you the protection you need.

2.You need more liability coverage

If you’re renting a property and a tenant gets seriously injured, they may sue you for damages. Your personal liability insurance on your policy likely won’t cover damages to renters who live there for an extended period of time. Your homeowners insurance carrier did not sign on for that risk, and they may well deny the claim.

3.You may render your umbrella insurance coverage void

Umbrella coverage is important and cheap. One of the reasons it’s cheap is that it only goes into effect after other kinds of insurance have paid out their maximum claims. If a tenant sues you and you don’t carry landlord insurance, your umbrella carrier may resist paying the claim as well. Their lawyers would argue that you were negligent is not obtaining the basic landlord coverage, and there fore misrepresented your true risk profile to them.

4.You need more liability coverage than homeowners insurance typically provides

Most homeowners insurance policies limit personal liability coverage to a few hundred thousand dollars. But landlords frequently face lawsuits with damages that amount to much more than that, particularly when negligence is involved. Landlords typically need at least $1 million in liability coverage.

Increasing your overall liability coverage from a couple hundred thousand dollars to $1 million may cost you a few hundred dollars more per year. The immense difference in protection is worth it, however, in that it will provide sufficient coverage for the vast majority of lawsuits and other legal actions.

  1. You may need legal help

If you’re embroiled in a landlord-tenant legal dispute or are being sued by a tenant, your homeowners insurance carrier may not cover your legal costs. Their policies are limited to non-landlord tenants,which have a very different risk profile.

The costs of legal representation can easily run to $50,000 or more. Most landlord insurance policies provide help with legal defense,including a “duty to defend clause,” that’s specific to cases that arise as a result of activities related to managing rental real estate.

6.Protection from government regulation-related lawsuits

Standard homeowners insurance doesn’t provide coverage for housing discrimination lawsuits or problems arising from disputes over the Americans with Disabilities Act, the Fair Housing Act, state regulations or anything else. Landlord insurance carriers understand that these disputes occasionally happen, even with landlords who ever intend to discriminate. They therefore design their landlord insurance coverage with this in mind.

Protection from tenants who cause harm

Suppose you have a tenant whose dog bites a child. The average dog bite claim is close to $30,000, but few renters would be able to pay that much.Many plaintiffs’ lawyers will go after the landlord, knowing where the pockets are deepest. If all you have is a homeowners insurance policy, and you file a claim, you’re going to have problems with your insurance carrier the moment they find out you have a renter.

8.Lost income is covered if property becomes uninhabitable

Many landlord insurance policies come with fair rental income insurance that will cover your lost income if your tenants have to move out because they can’t live in the dwelling anymore due to it being inhabitable.


For many rental property owners, having the proper insurance coverage isn't enough to keep their rental income safe and sound. Professional help from property managers is the best way to ensure your rental properties remain well-managed - and your rental income stream is kept protected from litigation, maintenance emergencies and other potential issues.

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LaDawn Westbrook

With more than a decade of experience, LaDawn enjoys educating first time home buyers, working with the 55+ community, relocation clients, sellers who want to downsize, step up purchase or anything in....

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