Homeowners Insurance vs. Landlord Insurance

Oh, the world of insurance — it can be frustrating to understand and as confusing as trying to do a Rubik’s cube with your eyes closed. As an Atlanta property manager, I know that you need to have insurance to protect against any possible property damage, but which kind do you need and what does it cover?

The following is a breakdown of the differences between a Homeowner’s Insurance Policy and a Landlord Insurance Policy.

Homeowners Insurance

Homeowners insurance typically covers a property from forces of nature, such as wind, fire, storm, or earthquake damage. In addition, it protects the homeowners property and belongings from theft and vandalism.  Homeowners are able to rest easy knowing that should something devastating happen to their home, they will be able to receive monetary compensation to complete needed repairs and to replace material belongings.

Landlord Insurance

Landlord insurance, on the other hand, protects the property from mother nature — including fires, storms, hail, earthquakes, etc. This insurance generally covers the residence as well as other structures on the property. Such structures may include a patio deck, fence, or shed. Landlord insurance typically does not cover against damage to personal belongings of the tenant.

Coverages

            Loss of Income

Should the rental property fall victim to a disaster, your tenants may have to find another place to temporarily reside until the home is again inhabitable. As a property management company in Atlanta, this leaves you with the responsibility of repairing the home, without receiving your usual tenant income. If the repairs are extensive, this could cause a big hole in your wallet.

Homeowner’s Insurance does not take this situation into consideration. However, Landlord Insurance does. When necessary, it will cover all or a percentage of the income that the property management company in Atlanta is losing due to destruction on the property.

            Liability

Liability insurance is financial protection in case someone is hurt or injured on your property. If you have liability insurance, you will not be held personally responsible for any monetary needs demanded by the injured party. If you are an Atlanta property manager, this is important!

Liability coverage is typically included in Landlord Insurance Policies. However, Homeowners Insurance Policies generally require liability insurance to be added on as an option. In addition, the coverage amounts available tend to be higher for landlords than for homeowners.

             Personal Contents

Should damage occur to the property, personal belongings are at risk. But who is responsible for the loss or damage to these? It depends greatly.

 Homeowners Insurance Policies typically cover personal property up to a selected dollar amount. And, some Landlord Insurance Policies allow for the coverage of your tenants personal belongings. However, many do not. It is important for the Atlanta property management company to discuss the possibility of rental insurance with their tenants in order to avoid a loss in personal property should something happen.

Cost

Mortgage CalculatorObviously the cost of insurance varies greatly on the size of the dwelling, its geographical location, the age of the property, the coverage you are purchasing, as well as many other factors. In the grand scheme of things, however, there is a difference in cost for Landlord Insurance Policies and Homeowners Insurance Policies. Which is more costly?

It seems that Landlord Insurance Policies tend to be approximately 15-25% higher than Homeowners Insurance rates. The good news is that you may be able to consider Landlord Insurance tax deductible when you are doing your taxes. Be sure to discuss this with your accountant!

 Considerations

real estate investing questions getting startedWhile you must make the decision on the best insurance type for your home, there are a few things to take into consideration or address:

  • How long with the home be rented? (Some homeowners policies will cover tenants if it is rented for just a short time. Make sure to check your policy.)
  • Require or strongly suggest that tenants purchase a renter’s insurance policy to cover personal property damage, if needed.
  • Make sure your coverage includes all structures on the property, not just the home.
  • Confirm that your policy will account for loss of income should the property become uninhabitable.
  • Decide if you reside in a region or area that is prone to flooding or damaging storms. If so, you may want to add flood coverage to your Landlord Insurance Policy.

You never know when disaster could strike — which is why it is so important to make sure you are protected when it does. Review your policy and discuss your options with your insurance agent. Don’t wait until it is too late!

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