When all goes well, investing in rental properties can be a great way to earn some extra income. Yet turning on that passive income stream requires a lot of work.
In addition to the hoops you need to jump through to become a landlord in the first place, you must continue to protect your rental property investment for the long term. One way to accomplish this goal is to choose the best rental property insurance coverage you can.
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The Best Rental Property Insurance for Landlords
As you shop for rental property insurance, you’ll find numerous providers that sell the product. We break down highlights of our five favorites insurers below. In the meantime, here’s a longer list of rental property insurance providers you can research.
- Safeco
- American Family
- Hippo
- American Modern
- Liberty Mutual
- Allstate
- Trusted Choice Inc.
- MetLife
- Foremost
- State Farm
- Farmers
What to Look for in a Landlord Insurance Company
As you search for the best landlord insurance provider, it’s easy to feel overwhelmed by the details. Here’s a tip that may help you manage the process better. Make a chart — by hand or using your computer — that lists the features that rental property insurance companies commonly provide along the top.
On the left side of the page, detail each insurance company you’re considering one by one. Finally, check off (or write notes about) the benefits each insurer provides. For example, your chart might look something like the following:
| Insurance Provider | Benefits / Areas of Coverage | ||
| Flood | Acts of God | Guaranteed Income | |
| ABC Insurance Co. | ✓ | ✓ | X |
| XYZ Insurance Co. | X | ✓ | ✓ |
As you compare rental insurance policy benefits, it helps to understand which information matters most. Some of the actual coverage areas and benefits you should research are detailed below.
Dwelling Coverage and Medical/Legal Liability
As you begin sifting through rental property insurance quotes, you’ll find that many policies include dwelling coverage. Dwelling coverage can pay for repairs to your investment home if it’s damaged by fire, hail, vandalism, lightning, or other covered loss.
Medical and legal liability is another common feature of many landlord policies. Liability protection may help cover medical bills and legal expenses if someone is injured on your property and you’re financially liable for the costs.
However, although dwelling coverage and liability protection are fairly standard with landlord insurance policies, the coverage limits offered can vary from one insurance company to the next. Not only may policy limits differ, but the rates you pay for coverage and your deductibles may also.
You should choose a policy that gives you enough dwelling coverage to repair or rebuild your rental property in the event of a disaster. As a general rule, you also want a policy that provides at least $1 million in liability coverage.
Sa El, Co-Founder of Simply Insurance, recommends purchasing even more coverage when possible. “Get as much coverage as you can afford on a monthly basis. The more you have,” El explains, “the better.”
Replacement Cost Value
The replacement cost value, or RCV, describes the amount of money it would take to replace your damaged property (aka dwelling) with a similar home now. Depending on your policy, you might also receive RCV benefits for personal property.
Replacement cost value is different from actual cash value (ACV). RCV doesn’t take depreciation into account. If you experience a loss, replacement cost coverage gives you the funds to repair or rebuild your rental property, regardless of its current condition.
It’s crucial to select a policy that will insure your rental property for 100% or more of its estimated replacement cost. Policies that offer actual cash value coverage could cost you a lot of money if something goes wrong several years down the road.
Personal Property Insurance
Personal property insurance doesn’t cover the structure of your property itself. Rather, personal property insurance covers the things you own in or around the home. These items might include furniture, appliances, electronics, clothing, books, etc.
In general, an investment property will mostly contain items that belong to your tenants. For this reason, tenants need to secure renters insurance policies of their own. Many landlords require proof of renters insurance as a condition of their lease agreements. You may want to consider making this a requirement as well. A renter’s insurance policy might help you avoid disputes and legal battles over liability if damages occur.
Your landlord policy may provide you with a measure of personal property coverage as the property owner. Choosing an insurance policy that includes such coverage is wise. Imagine you experience a disaster, like a fire, at a rental property. Personal property coverage might help with the cost of replacing appliances, tools, or other items you supply to tenants or use to maintain the property.
Acts of God Coverage
Another factor you should consider when comparing landlord insurance policies is the coverage different insurers offer for “acts of God.” Acts of God, sometimes called acts of nature, describes certain natural disasters like tornadoes, hurricanes, earthquakes, etc.
Some insurance policies limit or exclude coverage for damages caused by acts of God. Ideally, you’ll want to find a policy that covers damages caused by acts of God — or at least one that lets you add on such coverage.
Guaranteed Income Insurance
Many landlord insurance policies will cover you when you experience a loss in rental income, at least under certain circumstances. The coverage is known as guaranteed income insurance or income loss protection.
Here’s how income loss protection works. If you can’t house tenants and lose out on rental income due to property damage, your landlord policy might reimburse you for the rent you didn’t receive.
Finding a policy with guaranteed income coverage is important. Income loss protection might help you stay current on your loan payments while your investment home is being repaired. It could be a financial lifesaver until the property is ready to house tenants again in the future.
Flood Insurance
If your investment property is ever damaged or destroyed by a flood, flood insurance can help you to cover the loss. Unfortunately, flood insurance isn’t included with most rental property insurance policies. Instead, it must typically be purchased separately.
When you’re shopping for flood insurance, it’s best to find a policy that covers the replacement cost value of your rental. But finding a flood insurance policy that offers RCV coverage can be a challenge. Many flood insurance policies for investment homes only offer actual cash value coverage.
Emergency Repair Coverage
As a landlord, you’re responsible for covering certain repairs for your tenants when things go wrong. Emergency repair coverage can help you to pay for the cost of hiring a contractor or repairman for sudden, unexpected repairs.
If the pipes in your rental home freeze and burst, emergency repair coverage may help you take care of the costs to fix the plumbing in your investment home. A good landlord policy might also cover the cost of sudden travel to your investment property as you try to fix the problem or oversee the repairs.
The Best Rental Property Insurance for Landlords
Now that you know what to look for in a landlord insurance policy, you’re ready to begin your search. To make the research process a little easier, we’ve narrowed down a list to our five favorite rental property insurance providers.
1. Liberty Mutual
Liberty Mutual Insurance is the fifth-largest property and casualty insurer in the world. The company has provided insurance policies to customers for the past 100 years.
The insurance company provides coverage options for landlords who own 16 units or less (though the individual units must be housed in 1-4 unit properties). Additionally, Liberty Mutual will let you add your LLC as a named insured.
Benefits:
- Save money when you insure both your primary residence and rental property.
- Enjoy discounts if you haven’t filed a claim in the past five years.
- You can add on additional coverage for personal property, fair rental value, and umbrella coverage.
- Add on inflation protection and Liberty Mutual will adjust your rate and coverage automatically to keep up with inflation and rising repair costs.
Recommended for:
Liberty Mutual may work best for landlords who want the peace of mind of automatic inflation adjustments. Inflation adjustments can protect you in the future, making sure you have enough coverage to sufficiently cover repairs and replacements as prices increase with time.
2. Allstate
Originally founded in 1931, Allstate currently provides insurance coverage to around 16 million households in the United States. Although the company is a well-known provider of personal insurance coverage, both on the auto and homeowners fronts, it offers landlord policies as well.
To receive a quote for rental property coverage, you’ll need to reach out directly to an Allstate agent. The insurance provider does note that you can save money if you already purchase your auto or homeowners policy through the company.
Benefits:
- Save money when you bundle two or more insurance policies together.
- Standard and add-on coverage options include dwelling protection, vandalism and burglary coverage, protection of other structures on your property (garages, sheds, etc.), liability coverage, fair rental income coverage, building code coverage, etc.
- Add on flood insurance and personal umbrella insurance to enjoy the peace of mind these extra protections can provide.
Recommended for:
Allstate may be a good fit for landlords who wish to take advantage of policy bundling discounts.
3. State Farm
State Farm has been around since 1922. The company is currently the #1 auto and homeowners insurer in the United States and the #2 life insurer as well. According to State Farm, it services nearly 83 million policies and accounts nationwide.
In addition to the numerous other products the company provides, State Farm offers both landlord insurance and rental property insurance. Whether you need to cover a single-unit rental property or a larger apartment building, State Farm may have a solution to help.
Benefits:
- Qualify for safety discounts when you install alarms to detect fire, smoke, or burglary.
- Inflation coverage automatically increases the amount of insurance you carry as needed to protect your investment.
- Loss of income coverage may reimburse you for uncollected rent while your property is awaiting repairs.
- Enjoy coverage for damages that occur to other structures on the property (e.g., garages, pools, storage buildings, etc.).
Recommended for:
A landlord or rental property policy with State Farm may be a good fit for investors who want to cover additional structures located on their properties.
4. Farmers Insurance
Farmers was initially founded in 1928, just one year before the beginning of the Great Depression. Despite the unfortunate timing, the company survived. Today, the insurance company provides policies to over 10 million U.S. households — more than 19 million individual policies in total.
Landlord insurance is among the many services Farmers offers to its customers. Whether you have several multi-unit apartment buildings or a single-family home you rent out, Farmers may have a solution to help you insure your investment.
Benefits:
- Policies are highly customizable, allowing you to choose the coverage that matters most to you. (Be careful not to skip over important benefits that may come standard with other policies.)
- Add-on coverage for loss of rents, personal property losses, personal injury (including wrongful eviction lawsuit coverage), and other structures like swimming pools and driveways.
- Enjoy tenant screening services provided by TransUnion SmartMove.
Recommended for:
Landlord insurance through Farmers may be a good fit for investors who want more control over the types of coverage included in their policies.
5. MetLife
MetLife is a global brand that provides insurance and other services to customers in the United States and 50 other countries worldwide. The company, founded in 1868, is one of the oldest insurance providers in the U.S.
MetLife offers two distinct types of landlord rental property insurance. The first type of policy caters to investors who own properties with one to four units. The second type of policy is designed specifically for condo owners who rent out their properties.
Benefits:
- Liability coverage comes standard, so if a tenant or guest visiting your property sues you, your legal fees may be covered.
- Enjoy up to $1,000 of medical coverage for accidents that occur on your property.
- You can add on additional medical coverage if you wish.
- Identity protection benefits come with your policy.
Recommended for:
MetLife landlord policies may be a good fit for investors who wish to rent out a condo. The policies may also appeal to those who wish to take advantage of the standard medical coverage and identity protection benefits.
Can You Have Homeowners Insurance On a Rental Property?
If you’re renting out a room in your primary residence or engaging in a short-term rental, you might be able to get by with a standard homeowners insurance policy. (Be sure to check with the insurance provider to confirm.) Yet El advises that generally, “…you should not rely on a normal home insurance policy to cover your rental property.”
Landlord insurance may be the only type of policy an insurer will provide you if you plan to screen tenants and rent out a property on a full-time basis. So, whether or not you can use homeowners insurance to protect your property often comes down to how you intend to use the residence.
Rental property insurance is considered to be a higher risk than homeowners insurance. After all, tenants don’t tend to treat rental properties as well as homeowners care for their own homes. As a result, insurance companies tend to charge more for landlord insurance policies.
In general, you can expect the premiums on landlord insurance policies to run around 25 percent (or more) higher than standard homeowners policies. The added cost helps insurance providers offset the added risk — which is why a landlord policy is usually necessary if you won’t be living in the property.
Do I Have to Get Landlord Insurance?
As a rental property owner, you need a rental property insurance policy. If you owe a mortgage on the property, the bank will require you to carry enough insurance coverage to satisfy the debt you owe in the event of a disaster. Yet even if you own an investment property outright, it’s not a good idea to skip out on landlord insurance to cut costs.
According to El, “Regardless if it’s required or not, you should 100% obtain the coverage immediately.” Sure, cutting out the cost of landlord insurance might you might save a few dollars in the short term. But you’re potentially exposing yourself to a host of other problems and putting your investment at risk in exchange.
Final Word: The Best Landlord Insurance
In reality, there’s no such thing as the best landlord insurance. It is, however, possible to find a landlord insurance policy that’s the best fit for your situation.
You can rate shop to find the lowest price available for landlord insurance coverage. Yet, although finding creative ways to manage costs is a key to being a successful landlord, you shouldn’t base your insurance decision on price alone. Instead, your goal should be to make sure you get all the coverage you need so your investment is protected if something goes wrong. If you can find great coverage at a competitive price point, all the better.
This article was originally written on December 12, 2019.
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