do I need rental property insurance

What You Need to Know About Rental Property Insurance

September 16, 2021

If you’re a property owner, you’re responsible for ensuring that your rental is safe, clean, and livable for tenants. Rental property insurance helps owners cover financial losses and potential risks that come with renting out a property.

In general, renters aren’t responsible for application malfunctions, fires, injuries that occur on the property, or other things that could go wrong.

Keep scrolling to learn more about rental insurance coverage, including its importance and cost.

What Does Your Rental Insurance Cover?

Keep in mind that coverages for rental insurance vary greatly depending on the type of policy you choose. However, all policies typically offer coverage for personal belongings, dwelling, loss of income, and liability coverage.

Here are some key attributes of rental insurance coverage:

  • Dwelling: This covers damages to the structure of the property, which includes the walls and the roof.
  • Personal property: While renters are responsible for damage to their own personal belongings, you can get this coverage for your appliances and furniture in your rental.
  • Liability coverage: This offers you protection from potential medical and legal costs. As a landlord, you can decide how much liability coverage you need. If someone were to get injured on your property they could sue you for damages.
  • Loss of income: If a property is unlivable for one reason or another this will cover the income you loose and save you from facing a financial loss.

Cost of Rental Property Insurance

In general, it’s 25 percent more expensive compared to a homeowners insurance policy. The average homeowners insurance costs around $1,445 annually, which means $120 per month. Meanwhile, rental property insurance may charge you $1,806 annually or $150 per month.

Note that these numbers are the average. You may have more add-ons or liability coverage depending on the specific situation with your property. For example, you could add coverage for theft, vandalism, new construction, renovation, and more. Buying a separate umbrella policy is also an option if your net worth is more than your property’s liability coverage.

Also, there’s several types of policies you can choose from which can affect how much you pay for your rental property insurance. These are:

  • DP-1: This is one of the most basic policies and the most affordable. This would only cover items at their cash value.
  • DP-2: DP-2 is not much different from DP-1, but it covers a wider variety of thing at their replacement cost value.
  • DP3: This is the most expensive policy as it offers the broadest coverage range. The policy provides you with extensive coverage at a replacement cost value.

Summing Up

Your rental property insurance protects you from a variety of perils and uncertain situations. Thus, make sure you understand its features and costs before you choose one to purchase.