What Insurance Do Landlords Need to Protect Their Investment?

Written by: Invezz Newsdesk
January 3, 2020

As a real estate investor, you may understand your financial risks related to having a property that sits vacant for too long or a property that depreciates in value, but these are not the only risks you face when investing in real estate. There are other risks that can negatively impact your investment from a financial standpoint, and these can inflict considerable financial loss. The good news, however, is that real estate is one of the few types of investments that you can purchase insurance for. Insurance can minimize the financial impact of many events that otherwise may be financially devastating to endure. With a closer look at what landlord insurance is, you may be ready to reach out to local insurance brokers to find a competitive rate for the coverage you need.

Do You Need Landlord Insurance?

There are several types of landlord insurance that you can purchase as a protective measure, and the reality is that some real estate insurance may be required by your mortgage lender if you took out a mortgage on your investment property. Even when not required by a mortgage lender, most savvy investors will purchase at least a minimum amount of coverage, such as property insurance or public liability insurance for landlords. With these and other types of landlord insurance coverage, you will only have to pay a deductible when filing a claim for covered losses. Some events can result in tens or hundreds of thousands of dollars in financial loss for the property owner, and you can understandably see how the right insurance policy can provide significant financial protection for the perils that put your investment property at risk.

What Can Happen If You Are Uninsured or Under-Insured?

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Before you ask what is public liability insurance or how much property insurance you should buy, you should consider the financial impact that you may feel if you are uninsured or under-insured when a devastating event occurs. For example, consider if a tenant is injured on your property because of an issue that you are determined to be at fault for. The tenant may rightfully sue you for damages to recoup cost for lost wages, medical bills, pain and suffering and more. Some of these types of events can result in an award or settlement of hundreds of thousands of dollars or more. This is money that you may have to pay out of your own pocket if you do not have the right insurance in place. Even if you have insurance and it does not fully cover the full costs you incur, you will need to pay the difference out of pocket.

What Types of Landlord Insurance Do You Need?

With this in mind, you may wonder what types of landlord insurance you need. The main types include hazard and fire insurance for the property, sewer backup insurance, flood insurance, terrorism insurance, builder’s risk coverage for vacant properties that will be renovated, loss of income insurance, liability insurance and more. It is important that you speak with a knowledge insurance agent to determine your property’s need for various types of investor properties and to obtain adequate coverage for each type of insurance available.

How Much is Landlord Insurance?

Many investors want to know how the purchase of insurance will impact their monthly budget. As you can see, there are a wide range of investor property insurance coverage options available, and there are likewise variations in the amount of each coverage you can purchase. In addition, the age and condition of the property, its location and your preference for a higher or lower deductible are just a few of the factors that will influence the cost of the premium. It is best to first determine your coverage needs. For example, all properties may need liability coverage and fire and hazard coverage, but not all properties may need builder’s coverage or flood coverage. After you have determined the right coverage types to purchase, you can shop around with different insurance brokers to find the best offer available on secure insurance coverage.

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While there are many potential risks that could be financially burdensome to deal with as a real estate investor, the good news is that you can insure against losses. With many types of coverage available, it is important that you understand the options and that you purchase adequate coverage for your needs. Discuss your property’s insurance needs in detail with a trusted insurance agent as a first step in insuring your property.