Landlord Insurance: What Does It Cover?

Landlord Insurance: What Does It Cover?

Rental real estate is a rewarding investment, but it's not without risk.

A fire could raze down your property, reducing your investment to ashes. A storm, or other natural disaster, can cause significant damage. Even a tenant can get injured in the property and somehow, you're held liable.

As a smart landlord, you need a risk management strategy. One of the most effective tools to have in your arsenal is landlord insurance.

How does this insurance work, though? Are there different types of landlord insurance? This article has the answers you're looking for!

What Landlord Insurance Covers

Coverage terms for landlord insurance vary between insurance companies. Here's a breakdown of what you expect:

Property Damage

Your biggest worry is extensive property damage. In the event that it occurs, you'll either write off the loss or dig into your pockets to foot the repair bill -- if the property is repairable.

Luckily, landlord insurance ensures neither of those will happen. It provides property damage coverage. It compensates you in case of catastrophic property damage and foots the repair bill when damage is caused by a covered event.

For adequate coverage, ensure your policy covers several types of bad weather damage, burglary damage, and fires. It should also cover any buildings on the property, such as sheds and external garages.

Landlord Liability Coverage

Like homeowners, landlords can be held liable for accidents that occur on their property. The accident has to be tied to your legal responsibilities as a landlord.

For example, if a tenant slips on a faulty staircase and gets injured, you might be held liable for your negligent actions (failure to repair the staircase). The tenant can sue for compensation for the medical expenses, loss of income, and/or emotional trauma.

Landlord insurance provides liability coverage. It will foot the settlement bill arising from a successful claim or lawsuit.

Loss of Income Coverage

Running a rental property is akin to running a business. A disruptive event can disrupt your operations, causing a loss of income.

If a tornado causes extensive damage to your rental, for example, it may take several months to repair and get it ready for renting again. Throughout this period, you won't be earning rental income.

Landlord insurance covers loss of income, ensuring you keep earning your rental income.

However, it doesn't cover loss of income when the rental is unoccupied because of the inability to find a tenant.

What Landlord Insurance Does Not Cover

This policy does not cover a renter's belongings if the property suffers damage. There's renters' insurance for that, which you should encourage your renters to buy.

Landlord insurance does not cover repair costs arising from equipment malfunctions or failure. If a hot water tank goes out, the repair or replacement bill is on you; unless you have separate insurance for household equipment.

Get Landlord Insurance Today

Landlord insurance is the next thing you need to get after buying your rental property. Although risk events like fires and burglaries might be rare, they can still happen when least expected. Insure your property before it's too late.

Buying insurance is only a small fraction of what property management entails. If you need help with marketing, tenant screening, maintenance, and more, contact PMI Central Valley, a premier asset management company in Modesto, California.