What is Rental Property Insurance?
Rental property insurance is also known as landlord insurance and is in place to protect you, the homeowner. You take on a certain level of risk when you decide to rent out your home or condo for an extended period of time.
Regardless of the type of property you’re renting out (a home, condo, or investment property), rental property insurance protects your financial assets.
Coverage includes liability costs, property damage and loss of income if you’re unable to rent your property for any period of time following an unforeseen incident.
What Does Rental Property Insurance Cover?
It’s important to know exactly what rental property insurance covers so you can protect your rights.
Coverage varies depending on the type of policy you choose. Basic policies generally cover the following assets:
- The dwelling or structure
- The contents of the property that belong to you (furniture, household items, etc.)
- Liability coverage
- Loss of rental income
You’ll notice that most rental property insurance coverage is similar to homeowners insurance but with a few added features. These additions protect you against the risk of having tenants in your home or on your property.
What Is the Best Rental Property Insurance for Homeowners?
Once you understand the importance of having rental property insurance, it’s time to choose the best policy for your needs. Different policies (also known as forms) offer different levels of coverage.
These are known as Dwelling Policies or DP. The higher the number, the more coverage you’ll receive.
Here is a breakdown of the three most common policy types.
DP-1 is the cheapest form of rental property insurance you can buy and provides the most basic coverage.
DP-1 policies only cover perils named in your policy. That means if a disaster or peril occurs that isn’t listed on the form, it’s not covered and you won’t receive damages.
DP-1 policies are reimbursed on an actual cash basis. An insurance agent will assess the damage and cover you for what they deem is an appropriate value minus depreciation.
A level up from a DP-1 policy, DP-2 coverage is a little broader. Similar to the first form, DP-2 policies only cover named perils but the list of perils covered is much longer.
Another benefit to the DP-2 policy is that reimbursement is based on the replacement of the damaged items. That means your policy will cover the cost of replacing any damaged items at the current market price. Depreciation and wear and tear are no longer factors.
A DP-3 policy is the most expensive type of rental property insurance and for good reason. It offers the broadest range of coverage.
DP-3 policies protect against any and all perils except those specifically excluded on the form. All reimbursements are also based on replacement costs, similar to the coverage provided under a DP-2 policy.
How Much Does Rental Property Insurance Cost?
The cost of rental property insurance will vary depending on the type of coverage you choose. The broader the policy and the more coverage you have, the more expensive it will be.
Landlord insurance (or rental property insurance) is usually about 20% more expensive than traditional homeowners insurance. This is due to the risk of having a non-homeowner residing in your residence.
For example, if your homeowner’s policy is between $200 and $1,000, you can expect to pay between $240 and $1,200 for rental property insurance.
The good news is, certain loopholes can save you money. If you can prove that the residence will be occupied for most of the year, the insurance company may offer you a discount.
You can also deduct these additional costs from your property taxes
How to Get a Rental Property Insurance Quote?
If you’re considering renting out your home, condo, or investment property, you need to invest in rental property insurance.
Want to get a quote on a policy that’s right for you? This process is quick and easy!