Reasons Home Insurance for Rental Property Is Expensive

Most homeowner’s insurance policies cover the basic issues which can arise with home ownership. However, this insurance policy does not offer liability coverage required to cover tenants and protect the owners of rental properties. In this case, it is preferred that you get the landlord or rental property insurance which has been exclusively designed to cover the various requirements of a landlord.

When you put out a property on rent, you have to deal with multiple risks like late rental payment, bad location, property damage, and market price deterioration. This is the main reason why home Insurance for rental property is advised.

So in today’s guide, we will discuss home insurance for rental properties and the main reasons why it is more expensive than any homeowners insurance policy. To learn more about the best home insurance companies in the country, click here.

What is landlord insurance?

Home Insurance for rental properties is often termed landlord insurance. The standard insurance policy covers the investment on the property’s structure and other belongings owned by the landlord like curtains, dishwashers, blinds, carpets, and furniture. Some landlord insurance policies might include coverage for rent default, tenant damage, and loss of rent.

What is covered under home insurance for rental properties?

The insurance policy covers all the elements that a standard homeowner’s insurance policy would not cover.

  1. The structural integrity of the rental property

When you have this insurance policy, the insurer will pay for any structural damage to your property like the fence, hallway, entrance gate, side rails, etc.

  1. Personal belongings

The landlord’s insurance policy will cover any type of physical damage to the property due to disasters like hailstorms, fire or wind. If any natural disasters damage your personal belongings like appliances or furniture, the insurer will pay for them.

However, this policy is not valid for vandalism or any loss due to burglary.

  1. Liability insurance

Anyone can get hurt on your property, and in such a situation, this insurance policy will pay for all the medical expenses of the victim and your legal fees if the victim sues you.

  1. Rental Income

Your rental property might be unfit for living due to structural damage. In that case, the landlord’s insurance policy will cover you and pay for the loss of rental income as per the maximum policy limits.

  1. Other legal fees

Some landlord insurance policies also cover the fees and costs related to hiring a lawyer representing the landlord if he is to evict or bring other legal action against the tenant.

Additional coverage

Some of the elements which your landlord insurance policy will cover are:

  • Property collapse
  • Removal of weeds and plants
  • Removal of debris
  • Fire department service

One thing that you need to remember while buying landlord insurance is that the policy will only cover the landlord’s belongings and not the renter’s personal belongings.

Why is home insurance for rental properties expensive?

You may be wondering, “how much is home insurance for rental property units?”, and this is a difficult question to answer, but in general, it’s expensive.

Suppose you’ve ever received home insurance quotes for rental property buildings. In that case, you know that rental property insurance can be expensive due to the risks associated with a non-owner-occupied property.

  1. Rental properties are considered a greater risk.

In most cases, the insurance of a rental property is considered high risk since the policyholder or the landlord does not intend to live at the property. As the owner will not be staying at the property, there is a considerable risk that the property can be damaged or abused by the tenants. This is because most renters do not take good care of the rental property.

Therefore, rental property insurance will cost more for the landlord due to its increased liability protection and higher risk.

  1. Premium charges are higher 

As a rental property owner, you will be paying approximately 20% more to buy a standard home insurance policy for your property versus a standard homeowners insurance.

If, by any chance, you can prove to the insurance company that the property will be occupied for most of the year, you might be eligible for a lower monthly instalment. This is because unoccupied properties tend to add to the insurance cost as there is more chance of damage. Also, some insurance companies consider the constant habilitation of a rental property as less risk.

  1. Covers basic damage

Most of the basic rental insurance policies cover elemental damages. So if the property owner decides to furnish the rental property with various furniture, appliances and dishes, it will be covered by the insurance. However, this will also add to the monthly premium amount.

  1. Premium rates depend on the demographics

The location of your rental properties also affects the monthly installment of your landlord insurance. Insurance companies might give you a 25% discount on your monthly premiums if you can prove that the local fire department is situated near a water body.

Simply speaking, the province and the neighborhood in which your rental property is located can also add to the monthly premiums for your landlord insurance policy. It can also add to the monthly premiums if your property is in a high theft or crime rate area.

  1. Rental amount

Since the home insurance for rental properties will cover rental income loss, you will have to pay more for the coverage if your monthly rental income is higher. The monthly rental cost of your property is usually calculated based on the average building cost in your locality. So if the property cost is higher, you will earn more rental income and pay more insurance premiums.

How to reduce the cost of landlord insurance?

Most insurance companies do not offer any discounts on landlord policies. However, you can follow these few things to lower your monthly premiums:

  • Firstly you need to choose an insurance company that deals in rental properties and real estate investments
  • On your rental property, you need to install safety devices like burglar alarms, carbon monoxide detectors, fire alarms and child-safe windows to offer more security.
  • Always enquire about a new monthly discount on your annual insurance premiums.
  • Do not make claims for minor damages as the insurance company might increase their rates or decline the policy renewal at the end of the financial year.
  • If you own more than one rental property, you can always ask for a discount if you buy the insurance from the same company.

Home insurance for rental property — Endnote

Home insurance for rental property is considered a regular operating expense when you own or operate one or more rental properties. 

Even though the monthly premium charges can be higher than your regular homeowner’s insurance policy, you can easily pay the premium with the rent collected from the tenant.