How Much Does Landlord Insurance Cost And What Factors Contribute To Its Price?

Investing in rental property can be exciting, but not having the right insurance coverage can put your entire investment at risk. Owners of a rental property purchase landlord insurance because the building is now producing income and housing someone else, which a homeowners policy was never written to address.

Rental properties are more likely to have more severe claims than primary residences. Due to this increased risk, landlord insurance is more expensive compared to homeowners.

Claims history feeds into price, which is one reason habitability is worth watching. As California expands what a rental is required to provide, a dispute that once looked like routine maintenance can be framed as a habitability failure instead. It is worth understanding how that framing reaches a policy before a renewal.

Cost behaves differently once you own more than one rental. Carriers treat a portfolio differently from a single property, and how coverage works across multiple properties is worth understanding before the second purchase.

What is landlord insurance?

A landlord policy responds to damage to the structure in much the same way a homeowners policy does. What differs is everything built around that. It is written for a property occupied by someone other than the owner, it covers the income the property produces, and the liability it answers arises from the condition of a building the owner does not live in. Neither form insures the land itself.

A tenant carries their own renters policy for their belongings and their own liability. What sits with the owner is the structure, the income it produces, and liability arising from the condition of the property. That is the gap a landlord policy is built for. 

Renting out a property?

Cost follows the structure, the tenancy type and the liability limit you choose, and loss of rents is a separate limit again. All three sit on the declarations page. Read more about landlord insurance, or request a quote and we can review your policy with you. Call the agency at (818) 322-4744.

What does it cover?

Most landlord policies are assembled from three parts:

• Property Damage
• Liability Protection
• Lost rental income, sometimes called fair rental value

Property damage

A landlord policy responds to damage to the building from causes the form covers, typically fire, wind, vandalism and sudden accidental water discharge. Earthquake and flood are excluded, as they are on a homeowners policy, and need earthquake coverage or a difference in conditions policy alongside. Whether the policy settles on replacement cost or actual cash value is worth confirming on your declarations page. 

Liability protection

The liability protection covers legal or medical costs when a tenant or visitor suffers injury due to your property maintenance issue. Common examples are a stair or railing failure, a walkway defect, or a condition on the grounds that injures a visitor. 

Lost rental income

Lost rental income, often called fair rental value, replaces rent you would have collected while the property is repaired. The precondition matters: there has to be covered physical damage first. That is why the usual examples are fire, storm damage, or a burst supply line rather than gradual problems. Mold, insect and vermin infestation, and earth movement are commonly excluded or narrowly limited. Which of them your policy addresses, and how long the limit runs, is on your own declarations. 

What drives the cost?

Cost tracks what it would take to repair or rebuild, so materials and labor rates feed into it directly rather than tracking what the property would sell for. Here are the factors in calculating landlord insurance costs:

• Property square footage
• Reconstruction cost, which is not the same as market value
• Age and materials of home construction
• Crime risk
• Tenancy
• Environmental risk
• The limits you select
• Add-on coverage

The underlying reason a rental costs more to insure than an owner-occupied home is claim experience: rentals run higher on both frequency and severity.

Before the tenancy starts

The time to look at this is before a tenant moves in rather than after. Review the homeowner’s insurance policy you already hold, and establish what changes when the occupancy does. A policy issued on one description of the property is answering that description, not the one you have now.

At Schneiderman Insurance Agency, we help clients understand their coverage before they need it. To learn more about how we can help you, please contact our agency at (818) 322-4744 or request a quote online. Topics and coverage discussed in this article are not guaranteed, consult with your agents to determine what your policy does and does not cover.

Disclaimer

This article is provided by Schneiderman Insurance Agency for general informational purposes only. It is not legal, tax, financial, claims, or coverage advice. We are licensed insurance professionals, not attorneys, accountants, or financial advisors, and nothing here should be relied on as a substitute for advice from a qualified professional in those fields. This content is general in nature and is not a review of, or a recommendation for, any individual reader’s specific insurance needs, policies, or circumstances. Insurance coverage depends entirely on the specific terms, conditions, endorsements, exclusions, limits, underwriting eligibility, carrier, and facts of each situation, and the actual policy language always controls. We do not guarantee any coverage, pricing, eligibility, underwriting approval, or claim outcome. Reading this article does not create an agent-client relationship. To understand how these issues apply to your situation, please review your own policy and speak with a licensed insurance professional, and consult legal, tax, or financial advisors where appropriate.