A Quick Guide To Landlord Insurance
Updated: Jul 29
If you invest in real estate and/or rent out homes you will need to have a landlord insurance policy that protects you in at least three categories: property damage, loss of income, and liability protection. It would also be beneficial to invest in additional coverage, which will be discussed as well.
Commonly referred to as “dwelling coverage”, property damage covers damage to the physical structure of your building as a result of natural disasters, fire, vandalism, theft, etc. There are three different levels of coverage: DP1, DP2, and DP3. DP1: Called “basic property coverage”, as the name states it is the most basic form of property insurance and covers common perils such as fire and lightning. DP2: Similar to D1 in the sense that is it a “named risk” insurance policy, meaning it only covers the perils that are listed in the policy, but offering a broader list of covered perils. DP3: The most comprehensive of the dwelling property coverages, covering the broadest range of perils. DP3 is an open peril policy, meaning it covers all possible perils, aside from the ones listed as exclusions in the policy, commonly theft or burglary.
Note: It’s important to consider the payout terms for each of these coverage levels. Your property damages can be paid out in either actual cash value (depreciated value) or replacement value. Actual cash value will only insure you for how much the damaged property is worth minus depreciation, while replacement value will insure you the amount that it will take to repair or replace the damaged property.
Loss of Income:
If a fire, storm, or other event causes your property to be inhabitable, this coverage will compensate you for the lost income you would otherwise be receiving while your property is under repairs.
As a landlord, you are responsible for keeping your property safe and maintained to prevent your tenants from being injured and their belongings from being damaged. Liability protection protects you from events such as slips and falls to injuries as a result of structural issues in the home.
Some policies will offer personal injury which will help cover you if a tenant accuses you of slander or discrimination. Also, you can sometimes find policies that will cover equipment breakdown. Equipment breakdown will cover similar things that a home warranty will cover but with a larger service fee.
Flood/Natural Disaster Insurance:
Most policies do not cover flood/water damage and damage cause by earthquakes. But these policies may be purchased separate from the hazard insurance.
Personal Property Protection:
This is vital if you’re renting out a furnished home or apartment, as it protects you in the event of damages to your furniture, carpets, light fixtures, appliances, etc. But be careful, usually landlord policies will not cover theft or burglary. The tenants are responsible for obtaining renters insurance for insuring their belongings.
-AZ Insurance Team