Being a landlord comes with huge financial responsibilities and risks due to the fact that, as a landlord, you will have to spend a lot of your time and money getting your rental properties up and running. Consequently, it is important that you get the right insurance to protect your valuable investment.
As you know, investing in rental properties brings a sense of accomplishment. However, not having the right insurance coverage for your investment can jeopardize everything.
Now the question is, how much does landlord insurance cost per month? Well, before we provide the answer to this question, there are certain factors that we have to take into consideration.
So, let’s get started with what landlord insurance is.
What is Landlord Insurance?
Landlord insurance, also known as rental property insurance, is a unique type of insurance that is designed for those who rent or lease their properties.
It secures you as a landlord from a number of risks, such as damage to your property, liability claims, loss of rental income, etc.
A good number of insurers offer this insurance, and the cost of the policy can vary due to a number of factors. Landlord insurance can be an important investment for landlords, as it can help them avoid financial losses in the event of a covered incident.
Just as stated before, there are a number of factors that influence the cost of this insurance policy. Let’s get acquainted with them.
Factors that Affect the Costs of Landlord Insurance
The following is a list of factors that influence the cost of landlord insurance:
Starting with the property’s location, the location or environment in which a property is located plays a major role in determining the premium rate.
This is because insurance companies look at things like the crime rate, the risk of natural disasters, and the cost of living in the area when you want to purchase landlord property insurance.
Okay, let’s consider this instance, if a landlord’s properties are in a high-risk area such as Florida, then the cost of the premium will be more expensive compared to a property in a lower-risk area like Nebraska.
You understand, right?
What type of property do you own? You have to understand that the higher or more expensive your property, the higher your premium, and vice versa.
For example, a single-family home typically has lower premiums compared to multi-unit apartment buildings or commercial properties.
Age of the Property
The older the property, the higher its premium will be, as it poses or presents a higher risk compared to those properties that are new.
One of the main reasons for this is that older properties are more likely to have outdated wiring, plumbing, and other systems that may be more susceptible to damage.
It is also important to know that some insurance companies have certain age limits for properties and may not even offer coverage for them if they are too old.
So if you’re thinking about purchasing an older property, it’s important to check with your insurance agent to see if you’ll be able to get coverage.
The size of the property
The last item on the list, but not the least, is the size of the property. There is what is called a replacement cost estimate that insurance companies use to figure out how much it would cost to rebuild the property from scratch if it were destroyed.
That means that the larger the property, the higher the cost to replace it, and therefore the higher the insurance premium.
Types of Landlord Insurance Coverage
The following are the types of landlord insurance coverage:
Overview of the Types of Landlord Insurance
Dwelling Policy 1 is a type of insurance policy for rental properties. As a rental property owner, this type of policy is available to you if you rent your properties out only on a short basis, such as seasonal or vacation rentals.
This type of insurance covers the structure of the property and any other personal property of the landlord that’s kept on the property.
This type of landlord insurance policy is similar to that of a DP-1 policy but has additional coverage and is more expensive. DP-2 policies typically cover the same things as a DP-1 policy, plus liability claims and loss of rental income.
However, it is recommended for you if you rent out your property for longer periods of time, such as six months or a year.
Dwelling Policy 3 is the most comprehensive type of landlord insurance policy. It covers all of the things that DP-1 and DP-2 policies cover, with additional coverage options.
This coverage is mostly recommended to landlords who rent out their properties for longer periods due to the fact that it is more comprehensive.
What Does Landlord Insurance Cover?
Below are the things that are covered by landlord insurance:
1. Dwelling Coverage
This has to do with the physical structure of your rental property. It covers the cost associated with replacing the existing structure.
The type of coverage that is best suited for the dwelling is the DP-3. although is the most expensive, it covers every risk associated with this insurance, such as water damage, vandalism, etc.
2. Personal Property
Landlord insurance covers your personal properties, such as security cameras, pieces of equipment, etc.
3. Loss of Use
Let’s assume your rental income is the annual payment you get from your tenant, which is $40,000; then your loss of use coverage will be the same, which is $40,000
In this sense, we can say that loss of use coverage is the rental income you could lose at any time.
4. Other Structures
Some other buildings on your property can be covered by this insurance. Examples of such structures include your garage, sheds, etc.
5. Medical Payments
Landlord insurance covers any of the medical bills you may be responsible for.
In the case of injury or even a lawsuit, this insurance has you protected.
How Much Does Landlord Insurance Cost Per Month?
There is no exact figure for the monthly costs of landlord insurance. However, you should know that this insurance costs 25% more than homeowners insurance annually.
Although the cost of landlord insurance varies widely, a rough estimate can be provided. So, you are expected to pay between $100 and $300 per month for landlord insurance coverage.
You should know that this is a general range, and your actual premium may fall outside of it depending on your circumstances on the ground.
How to Save Money on Landlord Insurance
The following are ways to save money on landlord insurance:
- Shop around and compare quotes
- Improve your credit score
- Install security features
- Maintain your property
- Pay your premiums in full.
1. Shop Around and Compare Quotes
This is basically getting quotes from multiple insurance companies and comparing them side by side. There are many platforms through which you can compare quotes. You can use an online tool to help you do this.
It is important to pay attention to the coverage amount, the deductibles, and the policy limits when you are comparing quotes.
2. Improve Your Credit Score
Some insurance companies use your credit score to help determine your premium. If you have a higher credit score, then it could indicate that you’re a responsible person, and you’re less likely to make a claim.
3. Install Security Features
It’s also important to install security features such as a home security system or a fire alarm. This helps to reduce the risk of damage or loss to your property. By doing so, you tend to get premiums at a cheaper rate.
4. Maintain Your Property
When you maintain your property, it helps to reduce your premium rate. This is because adequate maintenance helps to prevent damage and reduce the risk of claims. This includes things like regular inspections, and keeping up with repairs.
5. Pay Your Premiums in Full
Some insurance companies offer a discount if you pay your premiums in full, rather than making monthly payments. So if you have the cash flow, this could be a good way to save some money.
FAQs on How Much Does Landlord Insurance Cost Per Month?
How much does landlord insurance cost?
Landlord insurance premiums vary widely depending on the location, size, and age of the property, as well as other factors. The average cost of landlord insurance is about $1,200 per year, but your actual cost may be higher or lower.
What is Landlord Insurance?
This insurance is not our usual or regular insurance. It is a type of insurance that is regarded as being special. Landlord insurance helps to protect property owners from financial losses related to rental properties.
Is landlord insurance tax deductible?
Generally, the premiums you pay for landlord insurance are tax deductible. However, it's best to consult with a tax professional to get specific advice for your situation. This is not legal or tax advice, just general information.
Can I get liability insurance as part of my landlord's insurance?
Absolutely! Landlord insurance policies typically include a certain amount of liability coverage as standard. This can protect you if someone is injured on your property and sues you. You may also be able to add additional liability coverage if you want more protection.
Landlord insurance is an important consideration for anyone who owns rental property. While it’s not required by law, it can provide valuable protection against a variety of risks.
Be sure to carefully consider the different options and choose a policy that fits your needs. I hope this information has been helpful.