What Does a Landlord Insurance Policy Cover?

As of summer 2021, the average home price in Brooklyn is $995,000. While any rental unit is an investment, those with million-dollar price tags deserve adequate protection. 

It’s not just about installing the latest state-of-the-art lock on the front door or thoroughly vetting tenants. As a Brooklyn landlord, you want to make sure that no matter what comes your way, be it a clumsy tenant, a natural disaster, or (gulp) another global pandemic, your financial investment and income are protected. 

You need landlord insurance if you are renting out space. Don’t even think about cutting corners on that. But what does a landlord insurance policy cover? 

Read on to learn more about how this type of coverage works and what to look for in a Brooklyn landlord insurance policy. 

Is Landlord Insurance Worth It?

Landlord insurance isn’t required by law (though your mortgage provider, if applicable, may require a policy as part of your loan’s terms and conditions). Either way, is having a policy worthwhile?

In our opinion, yes; landlord insurance is always worth its associated cost. But as an insurance broker for Brooklyn landlords, we may be a bit biased. So here are some impartial insurance and rental facts to consider.

  • A homeowners policy is only for owner-occupied homes. Once you rent out your home or an owned investment property, coverage provided by a homeowners policy no longer applies. This is a common misconception amongst landlords.
  • Liability doesn’t automatically fall on a tenant. For example, the cost of repairing a faulty air conditioner or the medical bills from a sidewalk slip and fall are almost always the responsibility of a landlord. While there are exceptions, it’s better to assume such expenses rather than be caught off guard.
  • Acts of God can destroy a rental property in minutes, with little to no warning. In some cases, having an applicable insurance policy (you may need to purchase insurance riders for certain perils) in place is the only way to avoid a total financial loss.
  • In 2019, Brooklyn experienced nearly 4,000 burglaries. The chance of being a victim of a Brooklyn property crime is 1 in 65. While a property damaging crime isn’t a guarantee in Brooklyn, the risk can’t be ignored. 

So while you may not be legally required to purchase a landlord insurance policy, it’s easy to see that the risks of going without are real and can quickly pull the financial rug out from both amateur and experienced landlords.

What Does a Landlord Insurance Policy Cover?

You’ve decided that a landlord insurance policy is in your best interest. But before you sign up with any old insurance company, take some time to learn about what a good policy should entail. While every landlord insurance policy is unique, we don’t recommend choosing one without these three types of core coverage.

Property Damage

Every landlord insurance policy should include property damage coverage, though the specifics of covered disasters will vary. Look for a policy that covers damage associated with fires, vandalism, irresponsible tenants, and natural disasters (though it’s rare for a policy to cover all acts of God). Take a moment to learn the differences between replacement cost and actual cash value before deciding on a policy as well, especially when it comes to property damage coverage.

Lost Rental Income

A rental unit can become inhabitable for many reasons. Whether it’s a mold issue, smoke damage, or severe tenant damage, a landlord may find themselves without tenants for quite some time while repairs are made. Lost rental income coverage provides temporary rental reimbursement until a unit is once again rentable. 

Just keep in mind that if you’re willingly keeping renters out, such as during cosmetic upgrades, this coverage won’t keep the money coming in. And for rare situations like the COVID-19 pandemic, whether or not you’re reimbursed for missed rent payments depends on your policy (though many landlords, unfortunately, discovered their policies would not reimburse them for months of missed rent payments during the height of the pandemic).

Liability Protection

Seasoned landlords can handle the occasional busted pipe or late rent payment. But one scenario that will always make a landlord sweat is an injury on their property. Whether a tenant takes a spill down the front stoop stairs of a brownstone or a guest trips in a common garden area, it’s more than likely that the landlord will be held liable. Liability protection provides coverage for medical or legal costs associated with on-site injuries.

There are additional types of coverage landlords can purchase as well, though they’re entirely optional. These include natural disaster insurance, landlord contents insurance, and personal umbrella policies to further protect a landlord’s property and investment.

When Do I Need Landlord Insurance?

In some scenarios, the necessity of landlord insurance becomes hazy. If you’re not a full-time landlord, do you even qualify for a policy? What if you’re letting a friend stay with you for a nominal fee? Will you be protected if they’re injured or damage your home? Here are a few questions to ask yourself, especially if you don’t list “landlord” as your occupation.

  • How long will I be renting the home out? Days? Weeks? Seasonally? 
  • Will there be a lease drawn up?
  • What will my estimated income be from the rental?
  • Am I furnishing the rental?

Knowing the answers to these questions will help you (and your broker) determine whether you need landlord insurance and whether you should consider additional options (such as contents insurance if you’re furnishing a rental).

Any time you’re renting out a property, whether your entire home to friendly strangers or a small bedroom to a close friend, call your insurance carrier. They’ll help you navigate through your unique situation and determine whether landlord insurance can offer protection. And if you’re considering going down the landlord route, read our tips for buying an investment property in Brooklyn.

How to Find the Best Landlord Insurance Policy

If you’ve been living under the misleading comfort of a homeowners insurance policy for your rental unit, it’s time to consider landlord insurance. Policies can protect landlords from property damage, rental income loss, and liability. The best way to purchase landlord insurance is through an insurance broker, like Lincoln Brokerage.

Our brokers have access to multiple insurance companies, allowing them to compare quotes and options from multiple carriers. This leaves you with personalized coverage that meets your unique property’s needs.

The answer to the question, “What does a landlord insurance policy cover?” is different for each provider. But one caveat they all have in common is that a policy must be in place prior to a claim to benefit from coverage. In other words, don’t put off securing a policy any longer. Reach ou to one of our independent brokers today.

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