All You Need to Know if You're a Landlord (or Are Thinking of Becoming One)

Fran Majidi
May 28, 2019

Maybe you outgrew your first condo and now want to use it as an investment property. Or, maybe you’re renting out a room or you’ve fallen on hard times and plan to rent out your home with an online letting agent while living in an apartment. Whatever your reasons are for becoming a landlord, you should have the right kind of policy in place before you let people take over your second home. There are instances when homeowners insurance suffices but sometimes you need a landlord policy. We’ll tell you what the differences are while helping you navigate the rules about leases and other necessities.

Homeowners Insurance vs Landlord Insurance

To have a homeowners insurance policy, you must live in the home itself. You’re free to rent out a room or two to tenants. Your policy will be thorough about the maximum number of people you can rent to and the maximum length of their tenancy. Always speak with your agent to find out what you are and are not covered for. The last thing you want is for a catastrophe to expose the fact that you’re breaking the terms of your policy. You may have your coverage revoked when you need it most.

A landlord insurance policy does everything that a homeowners insurance policy does (cover building and other structures like fences, sheds, etcetera) if damage or destruction results from a covered peril (hail, fire, lightning, and everything typically covered in a homeowners insurance policy).

One difference between landlord insurance vs homeowners insurance is that most belongings are not covered in a landlord insurance policy, which usually only covers items that service the rented property. Service-oriented items are things like a lawn mower or hot water heater, etcetera. Your landlord insurance will not cover you or your tenant if the home is burglarized and the thief steals the tenants’ laptop and camera. The only way your tenant would be covered is if they have a renters insurance policy. When possible it’s important to explain this as clearly as possible when renting your property so that if something were to go wrong, there won’t be any surprises. In the best case scenario, you would require the tenant to hold a renter’s insurance policy before moving in. Your tenants can find affordable rates by visiting here.

Another area that landlord insurance differs from home insurance is that liability limits are generally higher due to the higher risk of renting out to tenants. If a tenant is hurt in your home, they may try to hold you legally responsible. Your landlord insurance policy may pay for medical bills or legal fees. A homeowners insurance policy would only cover you and relatives -- and even if you were hurt away from the home.

Landlord Tenant Law

Each state has its own laws regarding landlord/tenant rights. A lease agreement is designed to protect both parties according to the state’s laws so don’t think it can stand on its own feet without meeting this requirement first and foremost. Your lease agreement is only as good as the landlord tenant laws that back it up. Sometimes, there are significant differences from state to state so make sure that if you copy a lease agreement online that it follows your state’s pertinent laws. If you end up having to take a tenant to court, you risk having your case being thrown out if the lease violates laws in your state (even if you otherwise have every reason to sue for damages). Worse yet, your tenant may take you to court for having an unenforceable lease agreement, in which case they may be eligible for a cash award that comes out of your pocket!

Also, if and when evicting someone, you must give notice, often more than one time and in accordance with state laws pertaining to evictions. If you’re involved in an eviction, it’s always a good idea to work with an attorney who knows how the laws in your state apply. Landlord insurance will cover your costs. The  landlord insurance cost is well worth the legal protection which would otherwise be very costly to pay for out of pocket.

Is Landlord Home Insurance a Type of Commercial Insurance?

Because you are using the property for income, a landlord insurance policy is a commercial insurance. Often, it’s called commercial landlord insurance. For a landlord insurance quote simply start with a commercial insurance quote here.

What’s Fair Rental Income Protection and Do I Need It?

A fair rental income protection policy is a type of landlord insurance policy, and the best landlord insurance policies include it. This protection may or may not be included in your standard coverage. If it’s not, you can and should buy it separately. This coverage may help replace lost rental income if your home is uninhabitable after a covered claim. Let’s say a severe hail storm caused roof damage and there were leaks and repairs that needed to be made. Your home would not be rented out during that time. A fair rental income protection coverage would pay for your loss of rental inome. The coverage is often available for up to one year, if needed.

What Does Fair Rental Income Not Cover?

  • If your tenant breaks a lease and leaves early rental income protection will not pay.
  • If your property is uninhabited between tenants, you are not covered for that in-between time.
  • If a tenant does damage to the property, fair rental income would not pay for it. This would be filed under your dwelling coverage under you landlord insurance policy. Depending on whether you have an actual cash value policy or a replacement cost policy, you will be covered for a loss if it’s a listed peril (like fire). There are what’s called “open peril landlord policies,” too, which means that they cover all kinds of damage done by the tenant, unless excluded in the policy. As you can imagine, this type of policy is more expensive.

What if My Tenant Damages My Home After I Start Eviction Proceedings

It happens. You get a tenant who turns out to be a psycho at worst and always late on rent at best. Either way, you have decided to evict this person, only to be met with threats that he/she will destroy the home on the way out. Take these threats seriously because they do sometimes end up becoming a reality.

Your landlord insurance will sometimes cover accident damage, but it depends on your specific policy. Fire is almost always a covered peril but not if it’s arson, in which case the tenant is committing a felony or threatening to do so. In that case you’d best contact the police immediately, as threats should be addressed and legally documented right away for your protection. Also, you should be reimbursed for most damages if your tenant has renters insurance (yet another reason landlords often make their tenants take out a policy).

Stolen fixtures, vandalism of the property and any other malicious types of damage are called intentional damage, or malicious damage, and they are sometimes covered by landlord insurance. Even though vandalism is covered in most policies, insurers often treat vandalism separately from malicious damage done by a tenant.You’ll have to check your policy to see if your offers that protection. It’s highly advisable to buy a policy that would protect you in these instances. It’s worth the extra money to have some peace of mind.

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