The Ultimate Guide to Landlord Insurance, Made Easy

If you are one of the many California residents who owns a rental property this article is just for you. Rental properties are a great way to bring in extra income, but it is critical you have the right landlord insurance policy in place to protect your rental property.

What is Landlord Insurance?

Landlord Insurance protects your building, just like a homeowners insurance policy, while also providing you with liability coverage in the event someone is inured on the property. You can purchase landlord insurance as an individual, under your LLC, or even under a trust.

What does Landlord Insurance Cover?

  • Dwelling coverage- Landlord Insurance covers your investment property against insurable perils like fire, wind, hail, etc.
  • Personal Property- A lot of the time you are not going to need personal property coverage but in the event your did furnish the property and want coverage for those items you would want to elect for personal property coverage
  • Loss of Rent- This will help cover any loss of rental income you face after an insurable loss, in the event your rental property is no longer inhabitable
  • Liability- Any bodily injury or property damage that you are found labile for.
  • Medical payments- can cover any medical bills for injured guests at your investment property

 

What isn’t covered by Landlord Insurance

In California, flooding and earthquakes are always excluded from landlord insurance and would need to be purchased separately. Here are some other common questions we receive:

 

Does my policy cover water damage?

Most of the time water damage is going to be covered under your landlord insurance. It is important to understand what types of water losses are not going to be covered by your homeowners insurance.

Types of Water Losses That Are Not Covered By Landlord Insurance

  • Water damage that is caused directly by a flood from outside your home would require a flood insurance policy.
  • Water backup from an outside sewer or drain. You have the ability to purchase this endorsement, but if not purchased any water that backs into your home through an outside sewer or drain would not be covered.
  • Gradual water damage. The standard California landlord policy provides coverage for”the sudden and accidental discharge of water or steam”. Sudden is the keyword here. Gradual water damage, like a water pipe leaking over a long period of time, is usually not covered by insurance. This is because it was not “sudden or accidental”. It was a long-term problem that went undetected.

Water damage that is determined to be sudden and came from within the home is going to be covered. Your landlord insurance policy will provide coverage for the actual building in the event of a water claim and any personal property that is damaged.

The most common water loss for California homeowners would be a burst pipe. The ensuing water damage is absolutely covered by your home insurance but the damage to the pipe itself would need to be paid for out of pocket.

Does my policy provide coverage for mold?

Mold is covered as long as it is caused by an insurable peril and has to be sudden and accidental. If you had a pipe burst and ignored it for a few weeks, decided it was time to turn in a claim, that mold will most likely not be covered due to negligence. Insurance companies expect you to be proactive and file a claim in a timely manner.

 

 

How much Liability coverage does a landlord need?

Your liability coverage protects you against lawsuits for any bodily injury or property damage that you  are found legally responsible for. This coverage includes legal fees and any court awards up to your policy limits.  If you have a pool, a trampoline, dogs, etc. you could be at risk for a major liability claim. We always recommend our clients carry at least $500,000 in personal liability coverage. If your tenant is injured on your property and tries to find you as being negligent for the loss, you need to make sure you have enough liability coverage in place. We also recommend our landlords carry an umbrella policy.

An umbrella policy protects you when the liability coverage on your landlord insurance is exhausted from a major claim. If your tenant suffers injuries that will now sideline them from being able to work for months, or years, they can sue you for lost income, medical bills, and pain and suffering. These costs can add up quickly.

 

Should I Have My Tenant Purchase Renters Insurance?

 

The answer is yes. Your tenants should purchase renters insurance to make sure they have coverage for their own personal items. You also want you tenants to purchase renters insurance so they have liability coverage in the event they are negligent for a loss that occurs on your property.

 

Will Landlord Insurance cover loss of rent?

You need to make sure your agent has included coverage for loss of rent after an insurable loss. If there is a fire and your investment property is no longer inhabitable the insurance company would now cover your lost rental income while the home is under construction. We always recommend selecting a high enough coverage limit to provide yourself with at least 18 months of loss of rent. Loss of rent is extremely important for a landlord to maintain a positive cash flow when a rental property is uninhabitable after an insurable loss. Loss of rent can be added onto a business insurance policy as well.

 

Top Landlord Insurance Companies

At Don Williams & Associates we work with the top landlord insurance companies in California. From Safeco Insurance to Travelers Insurance we have a wide array of companies to choose from.

Reach out to one of our insurance experts today at 408-402-3646 or fill out a form here to see how we can help protect your rental property!