Understanding Landlord Insurance

Why landlord insurance?

Landlord insurance exists to help you recover from certain accidental losses associated with your rental property. Whether we’re talking about the building itself, possessions you may have there, or possible liabilities that may arise from the property, having a rental dwelling policy can help protect you financially.

(As always, if you want nitty-gritty details about your specific insurance policy, you’ll need to consult your actual insurance policy as they can vary in significant ways.)

What does a landlord (or rental dwelling) policy cover?

In exchange for payment, an insurance company agrees to help protect you financially from events that might accidentally happen with your rental dwelling.

You can see more details below, but here are the three most basic things a landlord policy provides.

Most importantly, an insurer agrees to help cover repairing or replacing your dwelling structure after losses caused by certain perils such as fire, wind, or vandalism. Second, if the damage makes your rental home or rental units unlivable the Loss of Rents coverage will cover lost rental income. Finally, it also offers some liability protection for claims against you that might arise from your property.

In this part of Oregon and Washington, some of the more common rental property claims are trees falling onto houses, fires, a theft, or damages from a sudden water pipe leak.

Property Coverages

Dwelling (the rental property)

Let’s start with the easy part. Your landlord policy covers the structure of your rental dwelling from certain sudden and accidental losses caused by perils such as a fire, windstorm, hail, vandalism, a burst pipe, or something falling on it, like a tree.

Earthquake, flood, and landslide are not typically covered in a landlord policy but sometimes can be added either to an existing policy or as a standalone policy.

Like home policies, rental dwelling policies usually aim to insure the rental for an amount that it could reasonably be expected to be reconstructed. Policies will often have a sort of cushion beyond that as well, often called “Additional Replacement Cost” or “Extended Replacement Cost.”

Other Structures (separate structures)

A rental policy also typically covers structures on your property that are separate from the main dwelling such as a detached garage, a shed, a barn or a shop.

If there is a structural connection between the two, say a breezeway or carport, most insurance policies will not consider them as a separate structure, but it’s always a good idea to confirm with your agent whether the policy considers it a separate structure.

Personal Property (furnishings, some appliances, or on-site equipment)

A landlord policy typically has way less personal property coverage than a homeowner policy, but it too can cover your landlord possessions.

If you furnish your rental or keep significant property onsite, mention it to your agent so they can include an appropriate amount in the policy.

It’s important to know that certain categories do have “special limits” so if you have high value items be sure to ask your agent or insurance company about the limits.

Loss of Use or Loss of Rents

A landlord policy also pays for lost rents if your rental becomes unlivable from a covered loss. For example, if a fire damages your rental so that it takes several months or longer to get it rentable again, your policy will supply lost rental income for a certain number of months (usually 12 or 24) and up to a certain total limit.

Liability Coverage

Your landlord policy will also defend you from claims where someone sues you claiming that they sustained some physical harm from your premises. For instance, if someone trips down your deck stairs or gets hurt on your property.

The coverage amount typically ranges from $100,000 to $1,000,000 and is relatively inexpensive.

Medical Payments

Your landlord policy may contain some coverage for an accidental injury to an invited guest. This coverage typically ranges from $1,000 to $10,000.

Common Optional Add-ons (or Endorsements)

Extended Liability Coverage

Sometimes rentals are owned or operated by an LLCs or property management firms, and this endorsement can help make sure those interests are covered.

Property management companies (who typically have their own liability coverage) will sometimes request that they be listed as what’s called an “Additional Interest” on the property. That way they’ll get notified if the policy cancels or non-renews.

Occasionally, they’ll also ask that the liability coverage extend to them as well. This endorsement accomplishes just that.

Building Ordinance or Law Coverage

Sometimes county or state codes will require that a building be brought up to code when repairs are done. This coverage anticipates those costs that may be associated with bringing your rental dwelling up to code in the event of a covered loss.

Loss Assessment

Sometimes your rental dwelling is part of an association. This coverage is designed to cover losses that you may be assessed for as a part of that association.

For example, say a fire destroys the common clubhouse and the association assesses association members for $10,000. That’s where this coverage can come in and help.

Earthquake Coverage

Here in Oregon, earthquake coverage may be secured either through an option on an existing policy or by purchasing a separate policy.

Just like it sounds, having this option means that your policy will cover damage to your rental property in the event of significant damage by an earthquake. (I say “significant” because the earthquake option has its own deductible that is quite high when compared to the usual policy deductible, say 15% or 20% of the home coverage amount.)

Go here for our more full explanation of earthquake insurance.

Matching Siding/Roofing

Dwelling policies typically provide for repairing or replacing only damaged sections of your dwelling. In other words, if a section of your rental’s roof or siding is damaged, the contractor will do their best to make a good match, and under a typical policy the insurance company won’t cover undamaged sections just to get a match.

This option provides that for cosmetic purposes–for the purposes of matching– the insurance company can replace even undamaged siding or roofing.

Water Backup Coverage

Basic rental dwelling policies do not cover damages caused by water backing up through drains into the house. This option adds coverage for those damages up to a set limit, say $5,000 or $20,000.

Does a landlord policy cover my tenants?

A rental dwelling policy does not cover your tenant’s possessions or liability, and that is why many landlords have begun requiring their tenants to get renters insurance.

To put it another way, if a fire destroys your rental dwelling, your landlord policy will not offer any coverage to the tenants, either to replace their stuff or to transition them to a new place.

Landlords can require that their tenants get renters insurance here in Oregon (See ORS 90:222) with some basic liability coverage.

How much will renters insurance cost the tenant? You can expect the renters insurance to cost your tenants from $80-$250 per year. The cost often depends on how much personal property coverage they request.

You can go here to Learn about Renters Insurance.

Rates & Discounts

How can I lower my landlord policy insurance rates?

Take care of your property.

A well-maintained building has less claims, and less claims save you premium costs. It also can help prevent the headache of unexpected losses.

Talk with your agent before filing a claim.

It may be tempting to file a claim for a small vandalism or a relatively minor incident, and you certainly can, but if you want to keep insurance costs lower it can be helpful to think of property insurance as designed to take care of bigger losses. If you’re unsure about a particular loss, talk it over with your agent.

Consider raising your deductible.

Ask your agent how much you might save by bumping that deductible up. 20 years ago, it was way more common to have your deductible at $500 or $1,000 dollars, but now people frequently have deductibles from $2,500 to $10,000 dollars.

Tell your agent if you have

• A new roof. Many insurers use the age of the roof as part of the rate.
• Water sensors for detecting leaks.
• An automatic whole house water shut off.
• A security alarm system.
• Indoor sprinklers for fire suppression.
• A professional property manager.

Stay insured. (Or, don’t let your policy lapse.)

Lapsed coverage can increase your rates when you go looking.

Reduce your “personal property” coverage if you don’t need it.

Most landlords don’t furnish their rentals and may only have a few moveable appliances or some equipment on the property. So lower your property amount to match your need.

Reduce your “other structures” coverage if you don’t need it.

Some rentals have very little in the way of separate structures so double check how much of this you might need.

Consider bundling and not bundling!

Bundling is usually less expensive, but not always.

Check your discounts.

What discounts are available for landlord insurance?

• Rental dwelling policy discounts
  • Property management company discount
  • Multi-policy discount: This is for bundling other policies with the same company
  • Claims-free discount: No claims.
  • Loyalty discount: Staying with the company.
  • Payment method: Paying in full usually saves money.
  • Paperless discount. Agreeing to do everything electronically to save on mail costs.
  • Advance-quote discount: Some companies give a discount for getting quotes ahead of starting the policy. Start two weeks before for the best results.
• Building Discounts
  • Safety features & security systems: This is for things like deadbolt locks, fire extinguishers, or security alarm systems.
  • Sprinkler system (indoor): This is for fire-suppression.
  • New building: Newer dwellings usually are less to insure because they should be fully up to building code and there is almost no maintenance to be done.
  • New roof: Be sure to tell your agent if it’s been replaced.
  • Fully renovated or utility upgrade: If you’ve had your plumbing and/or electrical entirely replaced, this can be a significant discount. Be prepared to supply documentation.

How do they determine my rental dwelling insurance rate?

• Tenant information such as how long the rentals are for or whether you allow smoking.
• Local Laws: state regulations can vary quite a bit and can influence various policy costs such as landlord liability or the building ordinance coverage.
• Property information:
  • Location: some places are more prone to vandalism and theft, and others might be more prone to fires.
  • Number of units: whether it’s a single-family dwelling, a condo unit, a duplex, or a quad-plex can definitely change the rates. There are more tenants and there are also more kitchens and bathrooms.
  • Roof age and material: the older a roof is, the more likely it is that there will be a claim on it.
  • Building design & square footage: These factors influence how much it costs to repair your rental.
  • Age: Older buildings often require more costly repairs because of different construction techniques and building code changes.
• Your information
  • The property claim history: If you have a claim or claims, your rate will likely be higher than if you didn’t. If you have two or more claims within the last 5 years, it’ll be more difficult to find insurance.
  • Insurance score that is based on some combination of claims history and credit history (at the time of application here in Oregon). This one is a bit more complicated (and controversial), but the short story is that insurance companies have found a correlation between credit and propensity to file a claim. In other words, they’ve found credit history to be another indicator of risk and so they use it to help them determine how much to charge.

Other Guides & Helps

• The State Bar has a site devoted to Oregon’s Landlord/Tenant Law.
• Here’s a collection of resources specific to the Portland Area for Landlords and Tenants.
• And here’s a meager landlord resource from Washington County, Oregon.
• MultiFamily Housing Fire & Life safety Program | Tualatin Valley Fire & Rescue (tvfr.com)
• Learn more About Us (actual people!), our Sensible Approach, or our Carriers.