Insurance for landlords provides protection against property damage and liability claims. It also can pay repair or replacement costs and income loss for property owners who rent out one or more homes, apartments or condominiums more than a few weeks per year. It is not required by law but does cover things homeowner insurance policies does not.
What Types of Insurances are Available
Insurance for landlords usually is divided into three types: DP-1, DP-2 and DP-3. D-1 is a basic policy that covers things such as vandalism and fire. DP-2 covers a broader range of perils, such as hail and windstorms, and some even include a vehicle running into your rental unit. DP-3 is known as a “special form policy” or “open peril policy.” Unless something is explicitly excluded, it is covered. DP-3 also covers replacement cost, what something costs to replace now, versus cash value, what you paid for it when you bought it. “Landlord protective polices” cover things such as equipment breakdown.
What Should Be Covered by Most Policies
Rental property insurance typically covers damage to buildings and personal property caused by theft, vandalism, fire and storm damage. Some policies also cover tenant damage. It also covers liability claims and lawsuits if a tenant, visitor or even a trespasser, is injured on your property. Such costs can include judgment or settlement costs, legal fees, medical expenses and funeral costs.
You can buy additional landlord insurance for protecting your rental property. These policies include landlord contents insurance, employer liability insurance, natural disaster insurance (earthquakes and floods typically aren’t included in standard severe weather coverage) and rent guarantee insurance, if the building must be vacant for repairs due to a covered loss.
What Can Happen If You Don’t Purchase Insurance
Protecting your rental property is essential. If you don’t purchase rental property insurance you could suffer financial loss from a fire, break-in or severe weather. You also could get sued by a tenant or visitor who gets injured on your property. You also could lose income if your rental unit becomes unusable because of circumstances that are beyond your control.