Why obtain landlord insurance when owning rental property

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It may go without saying, but a number of homeowners and investors do not have any type of insurance for their rental property. Of course, if you carry a mortgage, your lender will require a landlord or fire policy. This way, if a water event, fire or theft occur at the property, they know it can be remedied since the property is the guarantor against the loan. However, if the property has no mortgage, it is up to each homeowner to obtain insurance coverage. And some either choose not to or are not aware they have to obtain it. Why obtain a landlord or fire policy?

First, in the event of an unexpected major event, such as water damage, fire or theft, insurance can cover costly repairs or losses for a reasonable deductible and yearly premium. Most insurance deductibles range between $500 – $1500. A significant water or fire event can cost thousands of dollars to remedy or in the case of a total loss, hundreds of thousands of dollars. With no insurance, the homeowner has to flip the whole bill rather than just the deductible. Protection against theft is also an important feature of insurance coverage. Beyond items that may be stolen from the property, such as costly appliances, the damage incurred to access the property can also be expensive. Among these are broken windows, doors, door frames and casings. The total cost of a theft can easily add up into the thousands of dollars.

Additionally, all rental properties carry liability risk. Insurance, on the other hand, protects an owner in that it offers liability coverage in the event a circumstance arises where the owner is found liable. This can include injury or death to tenants or visitors while on the property. Without insurance, financial liability will rest solely on the homeowner.

How does tenants renters insurance play a role? Renters insurance is designed to cover the tenants personal items, displacement and liabilities. It offers a different type of coverage than homeowners insurance. Thus, it does not offer protection to an owner for property damage or owner liabilities.

Yes, insurance is designed to protect an owner from incurring financial liability on their own. It is designed to transfer the risks that exist when owning personal and rental property. Risks can come from many sources. Being well protected is key to managing risk the right way.