Average Landlord Insurance Cost

What Does a Landlord Insurance Policy Cover?

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Landlords spend a lot of time and money getting their rental properties up and running. Therefore, it is essential to have the proper insurance to protect this valuable investment. Learn what is included in a landlord insurance policy and how much on average, a policy costs.

The Basics of Landlord Insurance

In general insurance policies offer two types of protection. The first part protects the physical structures on the property in case of a loss, while the second part offers liability protection in case of a slip and falls or other claims against your property. You will want your landlord policy to include:

  • Dwelling Coverage: This is coverage for the physical rental property. It is the cost to replace the existing structure. DP-3 is the best type of dwelling coverage you can get. It is the most expensive, but it includes coverage for “all risks” including vandalism and water damage. Claims are usually settled at replacement cost.
  • Other Structures: You should have coverage for any additional structures on the property, such as garages or sheds.
  • Personal Property: You want your policy to include coverage for any personal property you have at the rental, such as security cameras or equipment.
  • Loss of Use: This is coverage for any rental income you could lose. You want to make sure you have a loss of use equal to whatever your gross rents are. If you collect $5,000 a month in rent, you want your loss of use policy to equal $60,000, which would be the yearly rent collected.
  • Medical Payments: This is coverage for any medical bills you may be responsible for.
  • Liability: Liability coverage protects you against an injury or lawsuit. You will want a liability policy that is at least $500,000, but ideally $1 million.
  • Separate Umbrella Policy: If you have a net worth that is more than the liability coverage on your property, you will want to take out an additional umbrella policy that sits behind the original policy to protect you for that additional amount. If your net worth is $2 million, and your liability policy is $1 million, you will want an additional $1 million umbrella policy so that someone suing you cannot come after your personal assets.

Average Cost

According to ValuePenguin.com, the average cost of homeowner’s insurance in 2019 was $1083 for the year, with average premiums ranging from $600 to $2000 depending on the state where you live. Landlord’s insurance is significantly more expensive as it involves greater liability and often larger structures. You can anticipate paying about 20% more a year for landlord’s insurance than you would for homeowner’s insurance, which would theoretically bring the average cost of a landlord’s policy nationwide to $1300 a year.

Unfortunately, there is no average cost for landlord insurance. Costs will fluctuate wildly based on a significant number of factors. Costs will vary based on the state, county, city and even block your rental property is located on. The cost will also differ based on the type of rental property you own, these could include:

  • A Condo
  • Single Family Home
  • Two Family Home
  • Multi-Family Three to Four Unit House
  • Apartment Building- Five plus Rentals
  • Retail
  • Office
  • Industrial

Within these property types, you also have short-term rentals, seasonal rentals or full-time rentals. There is no average rental property, so there is no average landlord insurance cost. You should, therefore, get insurance quotes from several different insurance carriers to determine the best rate and protection for your rental property. The most important point is making sure you have the right type and amount of insurance coverage.

The amount of your deductible will also impact your annual premium. Usually, the higher the deductible, the lower the annual premium. Prior insurance claims can also impact the amount you pay for a policy, usually increasing your premium.

A Sample Policy for a 3-Family Home in New Jersey

The following is a sample landlord insurance policy for the year 2018, for a 3 family home in the state of New Jersey.

  • Dwelling Coverage: $655,000
  • Other Structures: Not Applicable
  • Personal Property: $5,000
  • Loss of Use: $50,000
  • Liability Coverage: $1,000,000
  • Medical Payments: $10,000
  • Annual Premium: $1905 for the year

Can Anything Help Reduce the Premium?

Having safety equipment on the property may help reduce your annual premium. This includes alarm systems, sprinkler system or motion sensors.

Understand What Is Excluded

It is just as important to understand what your policy excludes. The insurance company wants to be as specific as possible, because if it is vague, they may be on the hook for it. The policy will say what is covered and also what is excluded from coverage. Make sure you look at this list to understand what you are not protected from.

Terrorism Coverage

After the terrorist attacks of 9/11, with billions of dollars of claims, the government changed the way insurance was written. Acts of terrorism are not considered Acts of God, so are not covered under most insurance policies. You have to get a specific endorsement to your policy to protect you in the event of terrorism.

Renter’s Insurance

Renters are not covered under their landlord’s insurance policy. They need to purchase their own renter’s insurance policy to cover their possessions in the event of a loss. Average policies range from $10 to $20 a month.