Best Rental Property Insurance

Opting for the best rental property insurance can add protection for rental income and provide peace of mind for any damages or associated liabilities.

To choose the best-suited landlord insurance, you should account for your current situation and evaluate insurance carriers’ capability to meet your requirements. Ultimately, the factors that best fit a landlord are entirely dependent on their unique situation. But, how do you navigate through this marketplace, which is inundated with a plethora of insurance carriers—all offering the ‘Best Rental Property Insurance.’ There are a few options to make your selection journey simpler.

  1. Rely on the insurance carrier’s website and decide based on the ‘visible’ coverage on their policy documents—Do you have the expertise or knowledge to understand the insurance world’s technical intricacies? Do you have enough time to do the research and choose the best landlord insurance?
  2. Compare home insurance for a rental property using ‘comparing’ websites that provide general guidance catering to a broad audience—Are these tools considering your specific situations or requirements? Do they offer an in-depth comparison of niche segments like condos?
  3. Talk to an insurance agent who is an expert in their field and provide an unbiased opinion based on your situation—Do you have a trustworthy partner?

In any case, there has to be a necessary amount of know-how that a landlord should possess to make the right decision, which is based on rationales and free from perceptions. In this article, we will discuss the entire mammoth of homeowners insurance for rental property, which keeps you a step ahead of this industry’s changing dynamics.

rental property insurance idea

Homeowner’s Insurance policies don’t cover rental properties. Landlord Insurance protects you against repair costs by damages and liabilities for medical and legal.

Is getting the best Rental Property Insurance just a fad?

Industry data shows that more and more people are opting for landlord insurance. Currently, there are almost 44 million renter-occupied homes in the US. The majority of these owners (investors) are millennials shifting their investment focus from stock markets to rental properties. Being new investors, they are taking additional steps to protect their investment property.

Getting a landlord insurance policy is one way these intelligent investors are safeguarding their hard-earned investments. Further, with the projected massive influx of rental properties and an increased risk of property damage, there has been an accelerated demand to opt for the best rental property insurance by landlords to cover them against unfortunate events or careless tenants.

A recent survey indicates that almost 2/3rd landlords and investors are optimistic about the rental property sector going into 2021 and beyond.

Another trend is seen around AirBnB and vacation properties. As the world is slowly recovering from the COVID impact, Airbnb expects a renewed demand for vacation rentals. Hence, rental property insurance (specifically AirBnB Insurance) will see an incredible surge. Also, there is an expected growth of 3.4% CAGR in the global vacation rental market. Once again, millennials are the primary force in boosting such change, and it’s going to stay here for at least the next 10-15 years.

What is home insurance for a rental property?

Rental property insurance, aka landlord insurance, protects landlords against the liabilities caused by tenants or other perils like crime or weather. It is also called a Dwelling Fire coverage (DP-3), as it provides your dwelling coverage and protection against acts of nature, specifically for rental property. This insurance is available for multiple residential property types—apartments, condos, duplex, single-family, or even bigger properties.

Rental property insurance is similar to homeowner’s insurance, but it’s different in many ways. Rental property insurance, unlike the homeowner’s insurance, protects the property itself and not the contents. It also covers injury liability for the occupants, like medical bills or legal expenses, and covers you against crime (burglary, vandalism, etc.)

However, customizations and add-ons can also protect you from damages caused by accidents to essential systems within your rental property like electricals, water, or mechanical. Another notable difference is that landlord insurance covers your rental income, as it falls under a business category, which makes it a bit costlier than traditional homeowner’s insurance.

There are a couple of more variations in your property that you are not occupying permanently.

  • AirBnB Property: If your rental property is available on AirBnB, then your rental insurance policy might or might not cover your AirBnB property. If you are not sure, better read more about AirBnB Insurance.
  • Vacation Home: You might own a secondary property but for a vacation or as a second home. The risk associated is less than a rental property, and hence insurance premium for vacation homes might be cheaper.

What to look for when shopping for the best landlord insurance?

You might get overwhelmed while comparing landlord insurance policies. There are scores of players operating in the market, and each having tens of product variations.

However, to rationally evaluate the best rental property insurance, you need to illustratively list the pros & cons for each carrier across various features or requirements. This approach will give you a holistic view of your quantitative evaluation and help you make unbiased decisions. Here is a brief list of terminologies that are mostly used to compare home insurance for rental properties.

Dwelling Coverage

It pays for your rental property’s repairs due to damages caused by fire, flood, crime, etc. It will also cover the medical liability and legal expenses of the occupants in case of any mishaps. Landlords should opt for a policy that has enough limits to cover their costs.

Replacement Cost Value

It is the total cost to replace or repair your existing dwelling (damaged property) irrespective of its present condition. However, an insurance policy based on Actual Cash Value (ACV) may cost you more—if something happens after several years—as it takes depreciation into account.

Personal Property Insurance

Rental property insurance is limited to the property’s interior and exterior structure and doesn’t cover the personal property in and around the rented home.

For these reasons, tenants should secure a renters policy to protect their property like furniture, electronics, books, clothes, etc. To avoid disputes or mitigate any risks, landlords can ask tenants to provide a renter’s insurance policy as a mandatory condition to their lease agreement.

In the case of a fully furnished rental property and property where some furnishings are provided by landlords (like curtains, ACs, washing machines, etc.), you should include some level of personal property insurance in your landlord insurance.

Acts of God

Coverage against Acts of God might or might not be included in the policy of your insurance carrier. You should ensure that coverage against Acts of God (like hurricanes, earthquakes, tsunamis) should be included in your rental insurance policy as a default benefit or available via add-ons.

Guaranteed Income Insurance

If your income is primarily dependent on rental income, then opting for Guaranteed Income coverage can be a lifesaver. Under this coverage, your insurance carrier reimburses you for the loss of rent from tenants. It can also act as an extra layer of protection against defaulting your loan repayment.

Flood Insurance

Protection against flood is generally not included in Rental Property insurance. It has to be bought separately and preferably should be based upon RCV instead of ACV.

value bomb

Flooding is one of the costliest and most common perils to property, but insurance policies for landlords, homeowners, or renters usually exclude coverage against flood. One must bundle them with rental property insurance to get bulk discounts and extended coverage for your building, contents, and replacement costs against flood.

Emergency Repair Coverage

If your tenants demanded any emergency repairs (like pipe burst or malfunctioning of hot water), this coverage repays your contractor bills for emergency repairs. Some policies also cover the travel cost or material cost of repairs if you perform the repairing work.

landlord insurance breakdown

What drives the cost of rental property insurance?

Studies suggest that the average American pays about $1,445 per year in home insurance, but the cost of coverage depends on state laws, home location, and cost to rebuild. Hence, landlords can usually expect to pay between 20 and 30 percent more for their landlord insurance. Reasons being

  • Tenants have short term commitments and hence do not care enough for any early signs of structural damage.
  • Due to the frequent change of occupants (tenants), rental property is more prone to damages. 
  • The rental property also falls under the business category, which attracts more risks than their traditional counterparts.

The premium cost for landlord insurance varies drastically from one property to another. Key factors dictating the premium are:

rental property insurance information
  1. Property Value, Property Age, existing condition and the Cost of Replacement;
  2. Is it rented to family, students, or Airbnb rentals;
  3. The remoteness of your property from essential services like Fire, Hospital, Police
  4. State Laws or Crime statistics for the area
  5. Security features installed on the premises, like smart alarms, locks, and cameras
  6. Proximity to high-risk geographies like river, lagoon, or jungle.
value bomb

Prevention is the best way to save. Harness the power of Home Automation technology and install smart security appliances like Smart Camera, Smart Flood Detectors, and Smart Lock. These measures will reduce the overall risk of the rental property and can alert you during any event. Bonus—It helps you reduce the premium of the landlord insurance policy.

Our Methodology to compare landlord insurance

We intended to adopt selection criteria that make your decision process simple and fast. Our evaluation didn’t give preference to big brands or their popularity. Instead, we focused on the ubiquity of coverage vis-a-vis the cost-effectiveness of premium amount and benefits included.

We also compared the add-on benefits available in these policies and discounts or deductibles that might impact the premium amount. We even looked at ease of claim, customer support, navigating through the self-service portals, and available education materials.

Finally, we took trusted financial ratings into consideration that indicate an insurance carrier’s ability to pay out claims even during an adverse economic situation.

Safeco Insurance (A Liberty Mutual Company)—Best Overall

Ratings by Financial Agencies
A.M Best CompanyA (Excellent)
Moody’sA2 (Good)
Standard & Poor’sA- (Strong)
Ratings by Online Community
Wallethub2.9 out of 5
Nerdwallet4 out of 5

The company has financial strength ratings of A (Excellent) from the A.M. Best Company, A2 (Good) from Moody’s Investors Service, and A- (Strong) from Standard & Poor’s. Fitch rates the company as “A-“

Safeco insures up to 16 units and offers an astounding 25% extra limit on the dwelling coverage and Premise Liability coverage as part of their standard package. It also provides Rental Protection without any additional cost. One of the differentiators of StateCo is the Inflation Protection against the repair cost. This add-on is an excellent way of protecting property against economic changes. It also offers discounts and credits on bundles. On the downside, Safeco offers ACV for replacement & repair costs and doesn’t insure against floods. Enabled by fantastic 24X7 customer care and a seamless digital experience, Safeco is one of the leading contenders for the best rental property insurance.

Travelers—Best rated by the agencies

Ratings by Financial Agencies
A.M Best CompanyA+ (Superior)
Moody’sAa2 (Good)
Standard & Poor’sAA (Excellent)
Ratings by Online Community
Wallethub3.8 out of 5
Nerdwallet4.5 out of 5

Travelers Insurance offers comprehensive protection either as part of their basic package or available via add-ons. Some niche offerings are Coverage for Medical Payments (to 3rd party) and Personal Property Coverage (like landlord provided furnishings or appliances). Travelers Insurance also offers bundling options like Home & Vehicle or Jewelry & Valuable. However, Travelers policies only cover up to 4 units in a property by default. With better ratings from well-known agencies, travelers insurance is undoubtedly one of the best insurance available in the market.

New York Central Mutual—Best Customer Service

Ratings by Financial Agencies
A.M Best CompanyA+ (Superior)
Moody’sA2 (Good)
Standard & Poor’sBBB (Average)
Ratings by Online Community
Wallethub2.7 out of 5
Nerdwallet3.5 out of 5

New York Central Mutual is a niche player operating in and around New York and hence know their geography well, which works to their advantage. Their premiums are quite competitive and offer a huge range of discounts and add-ons at a competitive price. Although the website and portals seem to be outdated, the online community rates their claim services fast and accurately.

Farmers Insurance—Best for hyper-customization

Ratings by Financial Agencies
A.M Best CompanyB++ (Good)
Moody’sA2 (Good)
Standard & Poor’sA (Strong)
Ratings by Online Community
Wallethub3.7 out of 5
Nerdwallet4.5 out of 5

Farmers Insurance offers a wide range of offerings suited for diverse landlord profiles—a single-family home or several apartments. Policies are highly customizable, with add-ons having all possible coverages. Landlords can choose rental protection, personal property loss, and many more. The main differentiator is TransUnion’s tenant screening service, based on pay-per-use (no membership fee required) and thus provides a one-stop-shop for stress-free tenant onboarding. Farmers Insurance is suitable for landlords who want to take control of what to insure and what to not, and who like to engage more in-depth into the policy details.

American Modern—Best for large investors

Ratings by Financial Agencies
A.M Best CompanyA+ (Superior)
Ratings by Online Community
Wallethub2.7 out of 5

American Modern offers two types of rental property insurance—comprehensive & flexible. The Comprehensive Policy covers home up to 80 years of age, up to four-family structures, and above-average home conditions. All causes of loss are covered under the comprehensive package unless they are specifically excluded.

However, the Flexible Policy has no age limit on the home structure. Coverage is provided for losses caused by named perils in the policy, including fire, lightning, wind, hail, explosion, and more. While the Comprehensive coverage pays as per RCV, flexible coverage takes ACV into account. American Modern also offers a multi-property coverage option, suitable for large real estate investors with ten or more properties. This option is advantageous for busy investors as the American Union offers quick service by allowing you to pay for all insurance in one transaction.

The Rub

We should understand that choosing the best rental property insurance is similar to buying a phone or a laptop. Obtaining suitable coverage based on your requirements and situation is more than just the protection required for a building and the contents inside. The dynamics of various factors affecting your premium and complexity around assessing your liability needs means that experts often need to speak with you in detail to suggest the best landlord insurance companies for you.

At Rogue Risk, we help you “Win” the landlord insurance game by focusing not just on the cost of insurance premiums but your Total Cost of Risk.

Our proprietary process, RogueRisk365®, allows property owners and landlords to cut costs and free up cash flow while maintaining the insurance coverages you need to sustain your business.

The good news is, our process is simple and straight-forward. I’d encourage you to reach out to us today.

I look forward to introducing you to a new way of viewing your insurance program. 

Thank you, 

Ryan Hanley

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