How Much Does Landlord Insurance Cost? (2024) (2024)

Average cost of landlord insurance

Landlord insurance costs $2,100 to $4,000 per year on average, but annual premiums can range from $700 to $8,300+, with depending on the location and coverage selections. Rental property insurance typically costs 15% to 25% more than homeowners insurance due to the increase risks and higher coverage limits.

• Landlords need to insure not only their rental property but also the potential loss of income if repairs require tenants to live elsewhere temporarily.

• Rental properties also have higher liability risk than owner-occupied homes, which translates to higher insurance premiums.

• Insurance rates have increased by about 20% nationwide in the last year, after steadily increasing each year for the last decade. States seeing the highest increases include Arkansas, California, Florida, Louisiana, and Texas.

Landlord insurance cost by type

Landlord insurance policies bundle several standard coverages together. The main components that factor into pricing are dwelling, personal property, liability, and loss of income. Not every policy covers all components.

Dwelling coverage

A dwelling policy, or dwelling fire policy, insures the rental property's physical structure against fire, storm damage, theft, and more. It covers repair and reconstruction costs up to the limit selected. Typical dwelling coverage ranges from $100,000 to $500,000 based on property value. Higher limits mean higher premiums.

There are three types of dwelling policies, with varying levels of coverage and costs. A DP-1 policy is the cheapest but offers the least coverage and is best reserved for vacant properties only.

• The most common covered events listed in a DP-1 policy are fire, lightning, internal and external explosion, windstorms, hail, smoke, vehicles, riots, and vandalism, and volcanic explosions.

• A dwelling policy may or may not include other structures on the property, such as a garage, shed, or fence. Some providers require add-on coverage for these items.

Personal property coverage

Personal property coverage is for landlord-owned contents like appliances, furnishings, and maintenance equipment. Some standard policies include this coverage, but it’s an optional add-on in others. Higher coverage limits make the policy more expensive but reduce a landlord's financial risk.

Personal property coverage in a landlord insurance policy does not cover tenant belongings. Many property owners require tenants to purchase renters insurance so they are covered in the event of damage or loss and to prevent tenants coming after them to recover losses.

Liability coverage

Liability insurance covers bodily injury claims—legal fees, medical bills, and other costs—if a tenant or guest is injured on the property due to negligence, such as a crack in the sidewalk on your property causing someone to trip and sustain an injury.

A $1 million coverage limit is common for landlord liability insurance. Talk to an insurance specialist to determine if your property has higher risk factors that warrant adding an umbrella policy to increase your amount of liability coverage.

Loss of income coverage

Loss of income coverage reimburses lost rental income if a property is uninhabitable during repairs due to a covered accident. This coverage usually pays up to 12 months of lost rental income. Insurance premiums cost more for high-rent properties since they require higher coverage limits.

Rental property insurance cost calculator

Beyond the type and amount of landlord insurance coverage, key factors impacting landlord insurance pricing include:

• Location & climate: Insurance rates are higher in areas prone to natural disasters and crime. Urban areas also tend to have higher premiums than rural zones.

• Property age, size, type, & value:

  • Older properties that may not be up to current building codes bring higher risk, increasing insurance rates.

  • Large or expensive rental homes cost more to insure.

  • Landlord insurance costs less for single-family homes than for multi-unit apartment complexes or other commercial buildings.

  • Luxury properties cost more to replace and require higher dwelling coverage limits, which increases your insurance premium.

• Rental length: Short-term rentals like Airbnb or VRBO are riskier to insure compared to long-term tenants who are more likely to take care of the property as they live in it.

• Claims history: Frequent past claims, especially liability claims, will increase landlord insurance rates.

• Discounts: Landlords can qualify for premium discounts by bundling policies and having protective devices like alarms.

• Deductible: As with other types of insurance, policies with higher deductibles typically have lower premiums.

Cash value vs. replacement value

Landlord insurance policies calculate covered damage reimbursem*nt in one of two ways:

• Actual cash value (ACV) coverage costs less but only pays the depreciated value of an item, which can mean large out-of-pocket costs for landlords making repairs after a major loss.

• Replacement cost value (RCV) reimburses for the cost to replace the item at today's prices, up to the policy limit. This option requires higher premiums, but the coverage could save you thousands later if you need to repair or rebuild after a covered event.

Exclusions

Most landlord insurance policies do not include:

• Tenant belongings

• Loss of rental income if tenants don't pay

• Costs associated with evicting a tenant

• Equipment breakdowns (HVAC systems, refrigerators, building elevators, etc.)

Many landlord insurance policies also exclude certain higher-risk perils like earthquakes, floods, and sinkholes. Consider purchasing add-on coverage for excluded perils if the rental property is in a high-risk area for them.

Add-ons

Adding extra coverage increases premiums but provides peace of mind, especially if your property is in an area that experiences frequent damaging events not covered by the insurance plan you choose. While the options vary depending on the insurance provider, common add-ons include:

• Vandalism or theft coverage

• Lost rental income when tenant doesn't pay

  See Also

  2023 Landlord Insurance Guide To Protect Your Rental | Baselane

• Earthquake, flood, or tornado insurance

• Vacant property coverage

• Building code coverage

• Equipment malfunction coverage

• Additional property coverage for a furnished rental property

Landlord insurance cost vs. homeowners insurance

A typical home insurance policy costs $1,800 to $3,200 per year. Landlords pay 15% to 25%+ more than homeowners due to higher risks involved with rental properties and costly coverages like lost rental income. Still, the higher coverage limits provide essential financial protection for rental property owners.

While homeowners and landlord insurance policies both cover damage to the physical structure, landlord policies differ in several key ways that impact costs:

• Dwelling limits: Landlord policies typically have higher coverage limits, as larger multi-unit buildings cost more to insure than single-family homes.

• Loss of income: Homeowners policies don’t include loss of income coverage but it’s standard in most landlord policies.

• Liability limits: Landlord liability coverage is higher, often $1 million or more for adequate protection in the event of tenant lawsuits.

• Property usage: Tenants present greater risk and claims history is statistically higher for rental properties than owner-occupied homes, which affects premiums.

How to save on rental property insurance

While location and risk factors dictate base premiums, there are several strategies to reduce costs. Following these tips can potentially save landlords hundreds per year on premiums without sacrificing essential protections.

• Raise deductibles: Increasing the deductible to $2,500 or $5,000 can save you 15%+ on premiums.

• Pay annually: Most insurance carriers offer a discount if you pay in full for the year instead of monthly.

• Insure for replacement cost: This may not seem like savings initially since it increases your premiums, but the coverage can save you thousands in out-of-pocket repair expenses later.

• Bundle properties: Combining all your rental properties with one insurer can reduce your overall cost by 15% or more.

• Look for discounts: Membership in a landlord association, alumni groups, and other professional organizations may provide discounted group insurer rates.

• Avoid high-risk amenities: Features like pools and hot tubs increase insurance rates.

• Install protective devices: Smoke detectors, alarm systems, sprinkler systems, extra lighting, and other upgrades may qualify for premium discounts.

• Maintain good claims history: Avoid frequent claims to keep your renewal rates increases to a minimum.

• Maintain the property: Keep the property hazard-free by repairing issues promptly and ensuring there is plenty of lighting.

• Use an independent agent: Consult an independent insurance agent near you that specializes in rental properties. These pros shop multiple insurers to find you the best rate.

• Shelter your assets: Starting an LLC costs $85 to $1,500 if you file everything yourself, or

  $1,000 to $2,300 with the help of an attorney. An LLC, or limited liability company, protects your personal assets if a tenant sues you for damage that occurred while on your property.

• Review your rental contracts: Work with a qualified contract lawyer to ensure your lease contracts are worded properly to provide you maximum protection.

• Be informed: Keep up with local landlord-tenant laws, building, and safety codes.

Landlord insurance FAQs

Do I need both homeowners insurance and landlord insurance?

If you're renting out a property, you typically need landlord insurance. Homeowners insurance may cover you for infrequent short-term rental situations, but check with your provider first to confirm your coverage and limitations.

• Long-term rentals and frequent short-term rentals (think Airbnb or VRBO) are considered businesses and not covered by standard homeowners insurance.

• Airbnb or VRBO may offer some coverage through the companies themselves, but it may not be sufficient, and the claims process may be challenging.

• Some homeowners insurance providers offer upgraded coverage if you live in the same building as the unit or units you're renting out.

Is landlord insurance tax deductible?

Yes, landlord insurance premiums, deductibles, and other costs for insuring a rental property are considered business operating expenses and are tax deductible.

Getting estimates from landlord insurance carriers

When shopping for landlord insurance or reaching out to a landlord insurance agent, follow these guidelines to find the best company and plan for your rental property or properties:

• Look for an insurance agent who specializes in rental properties.

• Get quotes from at least 3 high-rated insurance companies. Compare rates, but also compare coverage limits, deductibles, exclusions, and add-on coverage options.

• Read landlord insurance company reviews on HomeGuide and Google. Look for trends of frequent denied claims and comments about the ease or difficulty of the claims process.

• Ask about bundling landlord insurance with auto or life insurance policies.

• Ask if you qualify for any other discounts.

• If your property is in a low-risk area, ask about higher deductibles for hurricane, wind, and liability.

• Read all the policy terms and conditions before signing anything.

Questions to ask a landlord insurance agent

Key questions landlords should ask agents when purchasing insurance include:

• Does this policy reimburse the full replacement cost or the actual cash value?

• Does the liability coverage meet state minimum requirements for rental properties?

• What are your loss of income coverage limits?

• Does the dwelling policy cover other structures on the property, like a shed, fence, or garage?

• Does the policy cover mold damage, sewer backups, and other water damage?

• Do you offer a discount if I insure multiple rental properties?

• Which events will you cover, and which will you exclude?

• Which upgrades or renovations qualify for a discount?