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How Much Is Landlord Insurance?

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If you’re a landlord or thinking of becoming a landlord, you should consider landlord insurance. Financial protection for your rental property and for accidents that could happen on it is a wise investment. 

You’re probably wondering how much it’s going to cost you. While there’s not a straightforward answer or flat rate, let’s take a look at a rough estimate of what it could run you and what factors affect the cost of landlord insurance.

How Much Does Landlord Insurance Cost?

Landlord insurance is generally more expensive than a homeowners insurance policy on an equivalent house. This is because a tenant-occupied house is a greater insurance risk than an owner-occupied one.

Unfortunately, there’s no exact average price of a landlord insurance policy, also called rental property insurance, since no two plans are exactly the same and prices vary by city and state. The cost of landlord insurance depends on many factors, but, according to the Insurance Information Institute, you can expect to pay about 25% more than a standard homeowners policy on the same house.

For example, the average homeowners insurance cost for a $250,000 house in the US is around $1,400 a year. If you owned this same average house and wanted to rent it out to tenants, a landlord policy could cost you about $1,750 per year.

Landlord insurance protects the structure of the house, liability in case of accidents on your property, and rental reimbursement in case something happens to the home that forces the tenants to move out and stop paying rent temporarily.

Why Is Landlord Insurance More Expensive Than Homeowners Insurance?

A landlord insurance policy is more expensive than a standard homeowners plan because, even though you’re buying the plan to protect yourself, you’re reliant on the actions of your tenants to not adversely affect your property.

An insurance provider is more comfortable trusting you in your home than trusting other people who don’t have a direct ownership stake. Tenants are more likely to not take care of a house as well as the owner would, and they may also be slower to report or respond to issues that could lead to problems and eventually claims.

For example, a tenant may be less likely to report a water leak behind the fridge if it’s not interfering with how the kitchen functions, or may not tell their landlord about a loose railing on the stairs and instead just live with it for the time remaining on their rental.

Tenants may also not respond to a sudden problem in the house as quickly or as passionately since it’s not actually theirs. They’re less likely to know where a fire extinguisher, water shut off, or electrical panel is if they needed them in a pinch, for example.

What Affects Landlord Insurance Rates?

The cost of landlord insurance can range widely throughout the country. The location of the house you want to be covered, its age, its size, and how long it’ll be rented out will all affect your plan’s premium. The amount of coverage you want and deductible you choose also play a role.

You can get landlord insurance for pretty much any property. Usually, the bigger it is, the more expensive the plan would be. For example, insuring an office complex or industrial building would cost more than a rental property insurance plan for a condo or a single-family house.

The length of the rental will affect your premium, too. Generally, a short-term rental would be more expensive than a long-term one. An insurance company believes a house with a few different tenants throughout the year on short-term rentals to be riskier than one longer-term tenant.

The coverage limits you choose also dictate the price of your plan. Typically, the more coverage you want, the more it’ll cost. Your deductible has a similar effect. If you’re willing to pay more out of pocket and have a higher deductible in case of a claim, it can lower your premium. If you want a lower deductible and the insurance company to cover more, it’ll raise the price of your landlord insurance policy.

The claims history of you or the rental property you want to insure could also affect your rates. If a ton of claims have been filed with the house in the past, you could pay more. It’s not all bad news, though. Some features of the home could lower your premium, like the presence of a security system, fire sprinkler system, or other safety measures.

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The editorial content on Clovered’s website is meant to be informational material and should not be considered legal advice.