What Landlord Insurance Covers
Previously, the focus was on what is not covered, so let’s talk about what is covered in a landlord policy, also known as a Dwelling Fire policy or a DP3.
Your landlord insurance package will include several coverage types designed for your risks. The exact details of your coverage will vary, but here are some key protections that landlord policies can provide:
Property Insurance
Property coverage is a key part of your landlord insurance policy, and it covers the property you own against physical damage. For example, if your property is damaged in a fire, you can file an insurance claim to cover the repair costs, up to your policy limit. Dwelling coverage specifically covers damage to the building structure itself. You should purchase limits that are high enough to cover the replacement cost of your property. Lately, inflation has significantly affected the rebuilding cost of homes, so please double-check to ensure you have enough coverage to rebuild.
Personal Property
Personal property in this case refers to items owned by you, the landlord, not the tenant. Typically, this includes items such as a washer and dryer or refrigerator. This coverage will not cover the renters’ personal property; they will need a renters policy for their belongings.
Liability Insurance
Liability insurance is another key part of any landlord insurance policy. A typical example of liability involves a tenant or guest who is injured on your property. If the injury is considered your fault – for example, because you failed to maintain the front steps and a broken step created a tripping hazard – you could be held liable for the medical costs. You could also face legal costs if the injured person files a lawsuit. Landlord liability insurance can help cover the medical and legal costs associated with third-party liability.
Pro Tip for Landlords: Here at Trailstone Insurance Group, we advise our landlord policyholders to mandate at least $100,000 liability coverage from their renters. If your tenant does not have a renter’s policy with liability coverage, you could be sued as the property owner for something that your tenant did… so be careful.
Business Income Coverage (Loss of Use Coverage)
If your rental property is badly damaged, you’re not just facing repair costs. You’re also facing lost income. Business income coverage provides important protection for landlords who depend on their rental properties for income. Depending on the landlord policy you choose, many times you can select the level of loss of use coverage.
Side Note on “Loss of Use” Coverage: Your landlord policy will not pay to put your tenants in alternate housing if needed. This is another reason to make sure your tenant has a renter’s policy.
Trailstone Insurance Group works with more than 40 “A” rated insurance companies. Please reach out to our team; we would be happy to answer any questions and help you find the best option for your insurance needs.
FAQs
What does property insurance in a landlord policy cover?
Property insurance in a landlord policy covers damage to the building structure itself. This includes damage from fire, storms, and other covered perils. It’s important to have enough coverage to cover the replacement cost of your property.
Does landlord insurance cover the tenant’s personal property?
No, landlord insurance does not cover the tenant’s personal property. Tenants need to purchase their own renters insurance to protect their belongings.
What is liability insurance in a landlord policy?
Liability insurance in a landlord policy covers medical and legal costs if a tenant or guest is injured on your property and you are found liable. It protects you from potential lawsuits and financial losses.
What is business income coverage in landlord insurance?
Business income coverage, also known as loss of use coverage, compensates landlords for lost rental income if the property is damaged and cannot be rented out. This helps mitigate the financial impact of lost rental revenue.
Why should landlords require renters to have liability coverage?
Requiring renters to have liability coverage protects landlords from being sued for actions taken by their tenants. It ensures that there is coverage in place if a tenant causes damage or injury.
Does landlord insurance cover the cost of alternate housing for tenants?
No, landlord insurance typically does not cover the cost of alternate housing for tenants. This is why it is important for tenants to have renters insurance that includes coverage for additional living expenses.