A Guide to Landlord and Property Manager Insurance

Melissa Matzenbacher-Galan | May 26, 2020 | minute read

landlord giving keys insuranceBeing a landlord or managing a rental property can be a tough and stressful endeavor. Making the job even more complicated is the increasing number of risks faced by landlords and property managers, which range from disgruntled tenants to natural disasters.

Are you aware of all the risks you face as a landlord as well as how to protect yourself against them? For example, are your properties among the 7 million structures in California now at risk of damage or loss from wildfire?

You need the right insurance policy to protect your assets and keep you in business when faced with expensive repairs, legal and/or compensation bills related to lawsuits, vandalism, theft, arson, fire, earthquake, wildfire and so on.

When the choice is investing a relatively small amount in insurance or going out of business from even one expensive claim, the right decision should be clear. After all, you don't want to be penny wise, pound foolish.

This quick guide will explain exactly which landlords and property managers need insurance; which general business and landlord-specific insurance policies apply; and the cost of Landlord Insurance. It also addresses the ever-increasing risk of a wildfire damaging or destroying your property.

Who Needs Landlord Insurance?

Many of the same risks apply to the entire spectrum of property management professionals, which includes:

  • Guy in robe bed landlord insuranceLandlords who own and lease residential properties (a single-family home, a single apartment or an apartment building or complex) for six months or more at a time.
  • Companies that own and lease commercial properties, whether it’s a sublet of part of your own office space or a broad portfolio of commercial office parks or other such properties.
  • Condominium associations.
  • Individuals and companies managing vacation rental properties.

If you rent your home on a temporary basis, or if you rent part of your home such as an in-law apartment, be aware that your Home Insurance probably won’t cover damages or loss related to the rental. So if the tenant in the basement leaves the bathtub running and causes extensive water damage to your property, you’re on the hook to pay for the repairs. Your Homeowners Insurance is also unlikely to protect you against liability claims should the tenant get hurt due to your perceived negligence.

Additionally, if you regularly rent a room or property for short stays of less than six months, perhaps through Airbnb, VRBO or a similar service, you probably need a different type of insurance altogether.

Unique to Landlords & Property Managers

Believe it or not, there are two types of insurance coverage that are designed specifically to protect property managers and landlords:

  1. Landlord Liability Insurance — This essential insurance coverage protects you against claims made by a tenant or a visitor for injury or damage caused by your property. If the affected individual claims that your perceived “negligence” was a factor in the incident, Landlord Liability Insurance will cover the resulting expenses including any medical costs. Your Landlord Liability Insurance also covers your legal fees and any damages or compensation if the individual sues you in court. (As with all things insurance, deductibles apply.)

  2. Building Ordinance Insurance — This type of coverage compensates you for the cost to comply with building codes, ordinances or laws enacted or changed after your building was constructed. For example, you may be required to install sprinklers in an existing apartment complex due to revised building codes.

General Business Insurance for Property Managers & Landlords

In addition to those landlord-specific coverages, your Landlord Insurance package may greatly benefit from the following policies if relevant to your circumstances:

  1. rental home property manager insuranceBuilding/Property Damage Insurance — Allows you to quickly rebuild or repair buildings or other structures like garages and sheds, if they are damaged by theft, vandalism, fire or certain natural disasters. Sometimes damage caused by a tenant can also be included. As with your Home Insurance, it’s recommended that you insure for “replacement cost” so you have adequate compensation in the event of a total loss and have to re-build from scratch.

  2. Outdoor Signs and Property Insurance — Covers the costs to replace outdoor fences, signs, trees, shrubs or plants damaged by covered events.

  3. Business Personal Property Insurance — Covers costs to replace any “personal property” stored at the rental property and used for maintenance — for example, a lawnmower and tools— if they are stolen, damaged or destroyed by a covered unforeseen event. It also includes property you provide to the tenant such as appliances and furniture if the rental property is furnished by you.
    (Note that your Landlord Insurance won’t cover your tenants’ property; you should encourage or even require your tenants to carry Renters Insurance.)

  4. Business Interruption Insurance — Covers you against lost income if you can’t collect rent from your tenants while the building and its contents are being rebuilt and replaced.

  5. Equipment Breakdown Insurance — Covers loss due to failure or breakdown of equipment such as boilers, heating systems and electrical equipment.

For Commercial Property Managers Only

colorful apartment complex commercial property insuranceCommercial property managers will likely need additional types of Business Insurance coverage beyond the Landlords Insurance products listed above. These could include Cyber Insurance and Errors & Omissions Insurance. “E&O” protects you when a client sues for financial loss or other damage based on what they perceive as your error or negligence. (Errors & Omissions is also called Professional Liability Insurance.)

These days, some of your clients/tenants may require you to carry E&O as a condition of their lease.

For a complete overview of the types of business coverage you might need, visit our Business Insurance page. Better yet, call us and one of our independent agents will walk you through the options and requirements.

Cost of Landlord Insurance

Landlord Insurance policies generally only run about 25% more than Homeowners Insurance, and the premiums are tax deductible. The cost of your Landlord Insurance depends on factors including:

  • Number and size of your properties
  • Location of the properties, which takes into account its proximity to earthquake or wildfire zones, and its crime rate
  • The condition of the properties, including the infrastructure and basic systems like electrical and plumbing
  • The value of the properties
  • Number of tenants
  • Which insurance agent and company you use
  • Your insurance agent’s ability to negotiate favorable terms for you, drawing from a large number of insurance company offerings.

A Note on Wildfires

wildfire California landlord insuranceCalifornia wildfires have become a very real threat to virtually the entire state. Our fires are stronger and bigger than ever. They last longer and are harder to fight. And as we’ve seen, they are sadly more deadly than ever. The number of properties and structures destroyed in California in recent years is staggering. Experts predict the situation will only worsen as the state becomes drier and hotter.

But if you need convincing that you should protect yourself against wildfires with Landlords Insurance, have a look at these statistics:

  • California is more prone to wildfires than any other state, meaning we have more households at high or extreme risk from wildfires.
  • California had more wildfires in 2017 than any other state - more than 9,500 in fact. That’s right. In addition to the big ones that attract national media coverage, literally thousands of other wildfires occur in a single year.
  • “The number of properties at risk of wildfire threat has grown to nearly 7 million in California,” according to a recent Time magazine article. “The figure marks more than a 1,000% increase in the number of homes and developed land in areas prone to wildfires since 1940.”
  • 2 million of the 4.5 million U.S. homes in wildfire danger zones are in California according to Verisk’s 2017 Wildfire Risk Analysis report.

Your Next Steps

The business of managing properties requires building and maintaining strong relationships with your business vendors and partners. Leap/Carpenter/Kemps was founded and built on personal relationships. Customers often cite this personal service as the special quality that sets us apart from other insurance professionals.

Whether you manage a single rented apartment or a large property portfolio, we understand your business. Unlike impersonal, faceless national companies, we are a local California company whose agents take the time to learn about any risks or requirements specific to each of our customers. That allows us to customize the right package of insurance policies to provide you with the most appropriate coverage at the lowest price.

And when you’re faced with an expensive claim, we’ll be right there at your side guiding you through the process.

Contact us today if you are in need of any of the protections listed above, or if you’d like one of our professional insurance agents to review your current policies to make sure you have the coverage you need.

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