The Cost & Coverage of Landlord Insurance

Homeowners insurance policies typically cost 25% more than homeowners insurance policies, according to the Insurance Information Institute. The average cost of landlord insurance was $1,478 in annual premiums, and the average cost of homeowners insurance was $1,192 a few years ago.

For example, we obtained insurance quotes for a typical 3-unit rental property in Chicago from five different companies, and insurance premiums ranged from $2,400 to $6,600 for the same coverage.

Reading: How much does rental property insurance cost

why does homeowners insurance cost more than homeowners insurance?

The main reason for the difference becomes clear when you think about who lives in the household. Insurance companies see fewer claims and lower average loss amounts on owner-occupied homes than rentals. Common sense says that no one will take care of a property like the owner.

And another difference appears when you look at the amount of liability insurance coverage. Landlords have higher levels of coverage to protect themselves from lawsuits and legal fees arising from injured renters or guests. it’s normal for a landlord’s policy to have a $1 million limit of liability.

Curious about what homeowners insurance costs in each state? We’ve put together a comprehensive guide to the cost of homeowners insurance throughout the United States.

Are there discounts on homeowners insurance?

Discounts do exist, but they’re not as bargain-driven as other types of coverage, like auto insurance. For example, State Farm grants price discounts for good grades or driving courses. You won’t find anything like it with homeowners insurance.

Instead, take a look at these two ways to save:

  • safety devices. install burglar alarms, fire sprinkler systems, or motion sensors to reduce the price.
  • multiple properties. combine homeowners insurance for all your rentals with the same company to lower your premium on each policy.
  • does my homeowners insurance policy cover my rental property?

    it depends. Answer how often you rent the property and how long people stay to decide what type of insurance you need. Take a look at these three scenarios to help you choose:

    • frequent short-term rentals. For Airbnb, VRBO, or another setup where multiple guests stay for a short period of time, such as a bed and breakfast or hotel, you’ll need a commercial insurance policy.
    • infrequent short term rentals. For rentals of your primary residence for less than 30 days, for example while taking a vacation, you can use your homeowners policy with approval from your insurance provider.
    • long-term rentals. for periods beyond the short term, such as a typical 6-month or 1-year lease, you should purchase an owner’s policy.
    • as a general rule to help, personal insurance does not cover business activity. For example, many personal finance experts suggest an umbrella policy to protect you from liability claims above the limits of your homeowners policy. But your umbrella policy would not apply to your rental investment property if you set it up as an independent business or LLC.

      Should I also buy renters insurance?

      See also: How much money will insurance pay for pain and suffering

      no, you don’t need to buy a homeowners and renters policy. Some confusion stems from the fact that homeowner’s insurance is sometimes called rental property insurance. Rental property insurance policies cover homes, and renters insurance policies protect your renters’ personal belongings and liability.

      Many landlords require their tenants to purchase renters insurance because it reduces the headaches when personal property claims arise. For example, if a fire damages your rental and destroys your tenants’ property, they may be able to sue you for damages even though they should have been protected by a renters policy.

      And landlords require renters to purchase renters insurance to protect them after a major claim. Let’s go back to the fire example. If the tenant had to move out until the repairs were completed, how would the tenant pay the living expenses? renters policy would cover that for them, while homeowners insurance compensates you for your loss of rental income while the house becomes habitable.

      a real world homeowners insurance example‍

      Let’s look at an actual rental property to break down what kind of insurance coverage you have and the costs. This 3,700 square foot apartment building with three rental units is located near downtown Chicago on Fullerton Avenue. it last sold for $950,000 in 2018, and the owner believes its replacement cost would be around $740,000 to $200 per square foot. it is fully leased and generates a monthly rental income of $6,000.

      The owner obtained three quotes from his insurance agent and purchased usli’s landlord insurance policy for a total annual premium of $3,137.

      See also: What Is Disability Insurance and Do You Need It? – Ramsey

      First, let’s review your insurance coverage, and then discuss what it means.


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