Rental property insurance is key in protecting you against any issues you might face as a rental property owner. You may think that home insurance will cover the necessary costs, but that isn’t actually true. In reality, rental property insurance, also known as landlord insurance, is a necessity if you’re planning on renting out a property.
How is Rental Property Insurance Different From Home Insurance?
There are a few key differences between rental property insurance and home insurance that landlords need to know. This includes:
- Personal property coverage: Home insurance typically includes personal property coverage for belongings like furniture and clothing. Rental property insurance won’t usually cover this–though they may cover items used to service the property, and potentially other appliances and furnishments for an extra fee.
- Loss-of-rent coverage: While home insurance has loss-of-use coverage that will cover living expenses if a covered incident causes you to leave your home, rental property insurance offers loss-of-rent coverage. This coverage reimburses you for any lost rental income if the home is uninhabitable due to a covered peril.
- Liability coverage: The liability coverage on a landlord insurance policy will often help pay for medical or legal fees if you are found legally responsible for a tenant being hurt in the rented property.
Protecting Your Property With Rental Property Insurance
What Does Rental Property Insurance Cover?
Comprehensive rental property policies will incorporate a few main protections, including the following:
Property Damage
Rental property insurance offers coverage if the property or furnishings are damaged due to a fire, a natural disaster, or any other covered issues. This may be replacement cost or actual cash value (the replacement cost with subtracted depreciation value).
Liability Protection
If someone is injured on the property (by falling on ice, an architectural collapse, or a similar injury) and you are determined to be at fault, liability protection will cover the medical and legal costs incurred.
Loss-of-Rent Protection
In the case that the rental property becomes uninhabitable and your tenants are forced to temporarily leave, loss-of-rent protection will reimburse you for any rent you are losing while the tenants are away from the property.
How Much Does Rental Property Insurance Cost?
Landlord insurance typically costs 15-20% more than home insurance. However, their price can vary depending on several factors, such as:
- Size. How many bedrooms does your property have? A two-bedroom property will cost less than a four-bedroom one.
- Location. Is the property in an area with high crime rates or a location prone to natural disasters? The risks created by the location will bring the premium up.
- Value. The higher the property’s value, the higher the premiums will be.
- Age and quality. An older building, or one that’s more prone to damage, will have higher premiums than newer, high-quality buildings.
- Your previous claims. If you have a long history of claims, your premiums will be higher.
Ultimately, expect your rental property insurance to be more costly than home insurance, but exactly how expensive it is will depend on the property itself.
What Isn’t Included in Rental Property Insurance?
Every insurance policy has exceptions, including rental property insurance. Like the prices and coverages, this can vary from policy to policy, so be sure to check what your policy does and does not include. However, there are a few exclusions that can be found in the majority of policies:
- Intentional acts committed by you or people acting with your permission.
- Lawful seizure of the property.
- Wear and tear, mildew, or mold.
- Repairs done by the tenant with your consent.
- Protection of your tenant’s personal property.
- Your belongings that aren’t major appliances (like refrigerators or stoves), or used for the upkeep of the property (like snowblowers).
What Additional Coverages Can You Purchase?
While not everything is covered under rental property insurance, there are several coverages that may be available to landlords for an additional cost. It’s up to you to decide whether these coverages are a necessity or not.
- Flood insurance: Covers you if your home is damaged by a flood, either as a result of a natural disaster or municipal plumbing. If the property is in an area prone to floods, you may want to consider adding this coverage to your insurance policy.
- Construction coverage: This covers you if the building is under construction or renovation.
Depending on your insurance broker, several other additional coverages might be offered, including coverage for theft, emergencies, vandalism, damage because of pets, and more.
Questions You Should Ask Your Insurance Broker
While doing research is incredibly helpful for understanding your rental property insurance, the best way to ensure you know exactly what your policy entails is to ask your broker. Below, we have compiled a series of questions to ask them during your next call or appointment.
- Does this policy use replacement cost or actual cash value?
- Does this policy cover floods and water damage? If not, can I purchase additional flood coverage? What type of flooding does this cover?
- Does this policy cover short- and long-term rentals?
- What is NOT covered under this policy?
- What can I do to reduce my rental property insurance costs?
- Is there any additional coverages I should purchase, given the status and location of my property?
Rental Property Insurance in Edmonton and Sherwood Park
A rental property insurance policy is necessary to succeed as a landlord. In the case of any hazard, having no rental property insurance could be disastrous. If you’re looking at renting out a property, be sure to have rental property coverage prepared–and if you’re already renting out a property without insurance, you should purchase it ASAP!
At Cornerstone Insurance, we want you to succeed. That’s why we offer comprehensive insurance policies for landlords in and around Edmonton and Sherwood Park. Contact us today to get started.
