There are numerous risks associated with renting a property to a third party. You need to protect both the property and your personal assets as you could still be liable for injuries occurring on your property.
What is Landlord Insurance?
A Landlord policy provides property owners who rent out the property to a third party with protection against financial loss. Most policies provide three coverages as standard.
The property portion of the policy covers the physical property itself and any fixtures and fittings you may have inside the property from damage or loss. Like a normal homeowners policy it protects you from risks like fires, storm damage, theft and it also protects against tenant damage. The policy can provides different types of coverage; Actual Value, which replaces the property at the value minus depreciation, so you get back what it is worth or Replacement Value, which replaces the property without depreciation, so you get back what you paid.
The Liability portion provides protection against he medical and legal costs arising from someone being injured on your property due to maintenance issues. For example, if there was a loose step on a flight of stairs and someone lost their footing if it wobbled as they stepped on it and they fell down the stairs, in this situation the landlord would be liable.
Loss of Rental Income Insurance
The loss of income portion provides reimbursement of lost rental income should the property become uninhabitable. For example if there was a fire at the property and the tenants were forced to move out it would pay the rental income until the renovations were complete and the tenants were able to return.
Landlord Insurance Riders
Depending on the insurance company providing the policy you may be able to add extra coverages to the policy to further decrease your exposure to unexpected expenses.
Extended Replacement Cost
Chances are you will have a mortgage on your rental property, if your tenant doesn't pay the rent are you in a position to make the mortgage payment? Extended Replacement Cost covers the rent you would receive if the tenant defaults on the payment.
Sometimes things happen and you will need to go to the property to make repairs or provide assistance to your tenants. Emergency coverage reimburses you for the costs you incur providing this assistance.