How Much Does Landlord Insurance Cost: Average National Cost in 2023

An often overlooked but crucial element of real estate investment is landlord insurance. It’s a special type of coverage designed for people who rent out properties they own, whether you’ve invested in a single rental property or have built an impressive portfolio, understanding the intricate aspects of landlord insurance and how it can protect your property from risks. 

It’s not just about safeguarding your investment; it’s about peace of mind, knowing that unexpected occurrences won’t leave you within an inch of financial ruin. In this guide, we’ll discuss everything from why you need landlord insurance to how much landlord insurance costs and ways to keep those costs down. 

Table of Contents

Why You Need Landlord Insurance

Ah, the age-old question that real estate investors often ponder: why do you need landlord insurance / rental property insurance? Well, let me make it easy for you. It begins with a deep understanding of the delicate dance between risk and reward. 

Owning a rental property is not just about getting rent checks; it carries responsibilities and potential risks. And that’s where landlord insurance comes into play.

Let’s say, for instance, there is an unfortunate event like a fire or flood. Without proper insurance coverage, you would be personally responsible for all repair and replacement costs if your property becomes uninhabitable.

Even worse? Rental income could stop overnight if your tenants must vacate due to damages. 

Landlord insurance is designed to catch these unforeseen disasters like a safety net. But beyond property damage from natural disasters or accidents, another risk from owning property is liability issues! 

As much as we might try to anticipate everything, accidents can still happen on your property. A tenant could slip on an icy sidewalk or trip over loose carpeting and sue you for their medical bills plus damages – yikes!

Your regular homeowners’ policy covers something other than this type of scenario. But guess what? Landlord insurance will. And let’s remember circumstances beyond our control where tenants may decide not to pay rent or cause intentional damage to your property before leaving unannounced (yes, such nightmares exist!).

Pursuing legal action against such individuals can be time-consuming and costly without guaranteeing success, whereas having landlord insurance means these predicaments are covered, too. In essence, owning a rental property can be quite lucrative, but it also opens up gateways to various risks that are part and parcel of this business.

Average Landlord Insurance Cost

Landlord insurance, like most types of insurance, comes with various price tags. The premiums will vary considerably based on many factors. Nonetheless, knowing the ballpark figures to aid in financial planning for your rental business is helpful.

On average, landlord insurance costs 20-30% more than standard homeowners insurance due to the added risk associated with rental properties. For instance, if you’re paying around $1,000 per year for homeowners insurance on a particular property, you could expect the corresponding landlord policy to cost between $1,200 and $1,300.

Note these are broad strokes estimates, and actual prices can diverge substantially based on certain variables and from states. Remember that while landlord insurance might seem like an added expense, it’s essential for protecting your investment.

The national average in the United States from several top insurers shows that landlord policies typically run from $925 – $2,542 annually. The broad spectrum of premiums reflects state and regional differences, disparities in coverage levels, and optional endorsements landlords may choose to add for further security.

Types of Landlord Coverage Available

Below is a breakdown of the varied types of landlord insurance coverage available, making it easier to decide based on your specific requirements. 

Property Damage Coverage – This covers your property if it has physical damage due to fires, storms, vandalism, etc. 

Liability Coverage – Ever worried about someone getting hurt on your property and suing you? This coverage will cover legal fees and medical expenses if someone gets injured.

Loss of Income Coverage – If your rental property becomes uninhabitable due to a covered event, loss of income helps you recoup some or all of that lost rental income.

Rent Guarantee Insurance – If your tenant skips out on rent or breaks the lease, this ensures you still get that rent money. 

Legal Expense Coverage – Legal battles can be pricey. If you are in a lawsuit with a tenant, this coverage helps with those hefty legal fees.

Natural Disaster Coverage – Mother Nature can be unpredictable. This coverage helps repair damages from natural disasters like earthquakes, floods, tornadoes, etc.

Burglary and Vandalism Coverage – If someone breaks into your property and decides to steal things or leave some “unwanted art,” this coverage helps repair and replacement costs. 

Building Code Coverage – If your property needs upgrades to meet current building codes after a covered loss, this coverage helps with those extra costs.

Factors Affecting Landlord Insurance Cost

Purchasing landlord insurance policy is like buying a tailored suit. The cost isn’t one-size-fits-all. Several factors come into play that determine how much you’ll pay for your policy.

Location of the Property

The region where your rental property is situated can significantly affect your landlord’s insurance costs. Insurance rates vary considerably from location to location due to the perceived risks associated with specific areas.

For instance, if your rental unit is in a neighborhood known for high crime rates, insurers may consider the property riskier to insure and, hence, charge higher premiums. On the other hand, properties in safer neighborhoods or gated communities may attract lower insurance prices due to the decreased likelihood of burglary or vandalism.

Proximity to fire stations and hydrants also influences your insurance cost as closer access implies quicker response times in case of a fire outbreak, reducing potential damage. The geographical locale of your property isn’t just about neighborhood safety, though. 

Certain parts of the country are more susceptible to specific natural disasters like hurricanes, floods, or earthquakes. If you own a rental apartment along coastal regions or near fault lines, you’ll likely pay more for insurance as these properties are considered high-risk zones.

Furthermore, whether an area has well-maintained infrastructure can also impact insurance premiums. Properties in regions with poor road networks or inadequate water supply systems might be deemed higher risk due to challenges that could arise when dealing with emergencies such as fires.

 

Age and Condition of the Property

Landlord insurance tends to increase for older properties, particularly those with dated infrastructure and amenities. Aging property is perceived as more susceptible to damages, ranging from plumbing issues to structural dilapidation.

Couple this with outdated electrical systems, and you have what insurers consider a high-risk investment. Moreover, older properties are often challenging to restore or repair due to the limited availability of matching materials or were built using techniques that today’s tradespeople might not be familiar with.

The cost of these specialized repairs can drive up the price of an insurance policy significantly. Therefore, an old but well-maintained house may attract lower insurance premiums than one that has fallen into disrepair. 

Now, let’s talk about the overall condition of your property. A well-cared property indicates fewer risks for insurers – less likelihood of negligence or poor maintenance claims. A landlord who exhibits diligence in regular maintenance checks and promptly addresses wear and tear significantly reduces potential hazards like fires due to faulty wiring or water damage from leaking roofs or pipes.

Insurers will look at how well upkeep the property condition in their risk assessment, leading to potentially lower premiums. Maintaining your rental property can be a cost-saving strategy when determining landlord insurance costs. 

Type of Tenants

Regarding landlord insurance costs, the type of tenants you have in your property can make a difference. Insurance companies often differentiate between various tenant classifications, and this factor can either increase or decrease your premium. Let’s take an example. 

If you’re renting out to a group of college students, be prepared to shell out more for your insurance premium. Insurance companies will generalize that younger tenants might throw parties that could result in property damage. But it’s not all about age demographics.

Some insurers also evaluate based on whether you’re renting to long-term tenants versus short-term guests, such as Airbnb renters. Again, the premise is similar – short-term renters have less vested interest in the upkeep of the property, leading to potentially higher risk and, thus, higher premiums. 

On the flip side, though, if your tenants are classified as low-risk – for instance, elderly people or families with children – don’t be surprised if your insurer offers lower premiums. These tenants are generally seen as more responsible when maintaining properties, posing lesser claims risks. 

Knowing who your tenants are will play a significant role when estimating landlord insurance costs.

 

Level of Coverage

Your insurance coverage level can significantly impact the overall cost of your landlord insurance. It’s pretty intuitive – the more protection you wish for, the more you’ll need to pay in premiums. 

Basic policies cover a limited number of risks, but if you want a comprehensive plan that offers broad coverage, including loss of rental income or legal expenses, expect to fork out more.

You see, it’s all about striking a balance between cost and risk tolerance. It might seem tempting to skimp on coverage to save money in the short term but remember—being underinsured can leave you terribly exposed in case an unfortunate event occurs.

Deductibles and Premiums

Deductibles and premiums are two sides of a critical coin when talking about insurance costs – especially as a landlord. Deductibles are the out-of-pocket amount before your insurance kicks in after a claim. In contrast, premiums represent the amount paid regularly (often monthly or annually) to keep your policy active.

The amount you pay in premiums will depend on several factors mentioned on this list, from property location, types of tenants, age and condition of property, etc.

Generally speaking, higher deductibles mean lower premiums—and vice versa. Therefore, if you opt for high deductibles – for instance, $1000 instead of $500 – be prepared for reduced monthly payments, but remember this also means potentially paying more from your pocket at claim time. 

On the other hand, if consistent lower payments post-claim sound attractive enough to offset higher regular premiums, then go ahead with a lower deductible option!

 

How to Estimate Landlord Insurance Costs

Online Calculators

Online calculators have become a boon for landlords who aim to approximate their insurance costs. These digital tools are quick and user-friendly, free of charge, and available on most insurance company websites. 

They employ intricate algorithms that consider numerous variables, such as the property’s location, age, condition, type of tenants you have, etc., thus providing a ballpark figure for your potential insurance premium. One must note that while these online calculators offer an estimate, they should never be as the actual you’ll be paying. 

The results are average rates and generalized data, which may only partially align with your unique situation. Therefore, although these calculators serve as excellent starting points in understanding how much you might need to budget for landlord insurance, it’s always wise to follow up with personalized quotes from different insurers.

Consulting Insurance Agents

Engaging an insurance agent for consultation can be hugely beneficial when estimating your landlord insurance cost. They understand the nuances and subtleties that could impact your premium, something that an online calculator might overlook. 

More importantly, they can tailor their advice to your situation, providing a personalized touch that’s hard to replicate with automated tools. Some may hesitate to consider extra costs associated with contacting an agent. 

However, it could save you money. An adept insurance agent will guide you through complex terms and conditions, help you ascertain optimal coverage levels, and identify potential discounts or deals you might qualify for. 

They could even assist in negotiating better premiums with insurance companies on your behalf. Speaking directly to multiple agents from insurance companies also provides another key advantage: comparison shopping.

 

Comparing Quotes

To accurately gauge the cost of landlord insurance, one cannot understate the importance of comparing quotes from different insurance providers. This process, aside from providing an eye-opening perspective on the range of prices in the market, can also offer insight into various coverage options and their associated costs.

Yet, comparing quotes is more complex than looking at two numbers side by side and choosing the lower figure. It is a meticulous process that demands careful consideration of each quote’s details. 

The price tag shouldn’t be your sole focus; instead, pay attention to what is included or excluded in each policy’s coverage. A cheaper policy may leave out crucial protection elements that could leave you financially vulnerable. 

Remember to examine each insurance company’s financial stability and customer service reputation as you compare quotes. An insurer might offer an inexpensive policy, but if they have a history of not honoring claims promptly or at all, it might be more trouble than it’s worth in the long run. 

Ways to Save on Landlord Insurance Costs 

Bundle Insurance Policies

One of the most effective ways to diminish the burdensome cost of landlord insurance is through bundling policies. What does this mean? It involves buying multiple types of insurance from the same company. 

This could be combining your landlord insurance with your homeowner’s policy if you have a private residence or with your auto insurance. Many insurers offer substantial discounts when you purchase more than one policy.

Bundling is more than just appealing for the financial aspect and simplifies management. Instead of juggling multiple policies from distinct providers and keeping track of different renewal dates and conditions, you’ll have everything under one roof.

 

Increase Security Measures

Bolstering the security of your rental property can result in significant reductions in insurance premiums. Numerous data and statistics from the insurance industry support this empirical fact. 

When you install robust security measures, you decrease the likelihood of burglary, property damage, or other incidents that might necessitate an insurance claim. Consequently, insurers interpret such steps as mitigating risk and will likely reward you with lower premiums.

Consider more sophisticated measures besides having basic yet effective safety devices like smoke detectors, fire extinguishers, and carbon monoxide alarms. Some upgraded security measures are burglar alarms, outdoor lighting, and surveillance cameras to deter criminal activities. In addition to these installations, upgrading door locks can also reinforce security while reducing your insurance cost. 

It’s an initial installation cost you will have to pay out; however, these are offset by long-term savings on lower insurance premiums and the potential avoidance of costly incidents down the line.

 

Regular Maintenance

Regular maintenance isn’t just essential for keeping your property appealing to potential tenants and a savvy method to lower your landlord insurance costs. 

By ensuring all the systems and structures in your property are running optimally, you reduce the likelihood of unforeseen disasters that result in hefty insurance claims. Regular plumbing checks prevent a small leak from morphing into a significant water damage issue that forces you to file an insurance claim and could potentially hike your premiums.

Frequent inspections of electrical systems can help prevent fires caused by faulty wiring or overloads. Regularly servicing HVAC units aids in avoiding unexpected breakdowns and subsequent damage due to extreme temperatures.

Keeping up with regular maintenance and repairs shows insurers that you’re less risky, potentially leading to lower premiums. Plus, maintenance includes taking care of aesthetic aspects like paintwork, lawn care, or clean windows, which might not directly affect insurance costs but will certainly keep your property attractive to quality tenants who pay their rent on time—another factor insurers look quite favorably upon.

 

Closing Thoughts 

It’s essential to remember that while national averages provide a ballpark figure, the actual cost of your landlord insurance will hinge on various factors, from your property’s location to its condition and even the type of tenants you have. 

Take a moment to assess your unique needs, consult with professionals, and ensure that your property and peace of mind are well-protected. After all, being a landlord is not just about collecting rent; it’s about building a secure future.