What is landlord insurance?
Landlord insurance, also known as dwelling or dwelling fire insurance, protects landlords and private property investors who own rental homes, condos, and apartments. At any time, tenants or natural disasters can cause costly damages, making landlord insurance an essential investment.
Without landlord coverage, you may face repairs and legal costs related to damage to your rental property. Depending on the situation and the size of the property, damages might cost thousands, hundreds of thousands, or even millions of dollars without coverage. Landlord insurance provides you with the security of knowing you’ll be protected from a financial catastrophe.
Do you need landlord insurance?
Unless mandated by your mortgage company, you’re not required to invest in a landlord insurance policy as a landlord or property owner. But purchasing landlord insurance is a good idea, as it helps protect your financials and assets.
Scott Hammersand, a licensed personal insurance advisor with Overmyer Hall Associates in Columbus, Ohio, explains the importance of landlord insurance, especially for those with a rental property not covered by a home insurance policy.
“Imagine getting a call from the fire department that your rental house just burnt down. The tenant was injured in the fire and is currently in the ICU,” Hammersand says. “Several days after starting the claims process with your home insurance company, you get a call from the company saying your claim has been declined. The reasoning is that your homeowner policy specifically excludes any rental use.”
In this scenario, you would be responsible to pay for the demolition and removal of your damaged property. Plus, if your tenant sues you over their injuries, you could be on the hook for court costs and settlements as well.
“Financially, this would be devastating, as the total cost of losing the house and settling the lawsuit could easily reach over a million dollars,” Hammersand adds. “Had you chosen to switch the home into a landlord policy, the financial impact would have been no more than the home’s deductible.”