Sacramento Landlord Insurance Guide from Eugene C Yates Insurance Agency

Having rental properties requires a different insurance product than your standard homeowners insurance policy. There are certain things you’ll want to be aware of depending on the location of your rental property and your situation. In this landlord insurance guide we will go over a few important aspects of rental property insurance so you have a little peace of mind in knowing you have the right coverage. 

The information within this article is for informational purposes only and should be used together with the advice of one of our wonderful agents. To speak to an agent now, please call us at (916) 313 – 6100.

What’s the difference between homeowners and landlord insurance?

If you plan on renting out your home to tenants, you’ll need to carry landlord insurance if you want to be covered. If the home is your primary residence you live in, then homeowners insurance is a better choice. 

You may be planning or already running a rental property business. If so there are additional insurance products you may want to consider. A basic homeowners insurance policy will cover standard liabilities such as theft and vandalism, fire and smoke, lightening and severe weather and more. Not to say these risks aren’t concerns of real estate investors as well, but you may want to look into additional coverage options so you know your properties are safe. 

In addition, there are other things you won’t need to worry about as a landlord such as your tenants personal belongings. This is usually the responsibility of your tenets and can be covered by purchasing a renters insurance policy. Some landlords may even require renters insurance so you know your tenants are covered. 

Then there are additional coverages you may want to look into such as loss of income, flood insurance or earthquake insurance. 

Rental Property Insurance Basics

Most landlords will want to be familiar with 3 different insurance policies: DP-1, DP-2, and DP-3. DP-1 is the most basic policy of the 3 and will cover the least amount and DP-3 is going to be the most comprehensive policy and will cover the most. For example a DP-3 landlord insurance policy will cover most perils such as vandalism and theft, whereas a DP-1 and DP-2 may not cover these same risks. With a DP-3 policy if a tenant injures themselves in your home and sues for medical expenses, your landlord insurance policy may cover legal and medical expenses. 

Landlord Insurance Policy Features

Below are some of the common features you may find in your landlord insurance policy:

• Property structure protection
• Personal property protection
• Liability
• Rental loss protection
• Flood
• Acts of nature 

Rental loss protection: Will cover the landlord for lost rental income if the home is uninhabitable due to a covered peril. This coverage will not protect against tenant default or vacancy. Although, if this is a risk you need coverage for you can always consider additional coverage options. 

Please keep in mind that if you have an HOA there may be additional insurance coverage associated with the ownership of the structure of the HOA. Condo buildings typically have their own insurance to cover risks they may run into. Due to this fact, it’s always a great idea to speak with an agent to make sure you aren’t purchasing double coverage.

How Much Does Landlord Insurance Cost?

The cost of landlord insurance is about 15% higher than your standard homeowners insurance policy. The national cost for homeowners insurance is around $1,300 annually, this would make the cost of rental property insurance about $1,495 per year. 

The cost of landlord insurance is higher due to the added risk. Your tenants usually won’t take care of your property the way the homeowner will. A few of the other factors that may impact your landlord insurance rate may be:

• Security features 
• Age and condition of the property
• Smart home devices that provide early warnings of potential issues
• Number of rental units 
• Location
• Safety equipment on the premise
• High-risk features such as wood fireplaces, pools, and hot tubs
• Long-term vs short-term tenants

5 Things You May Want to Consider Before Purchasing Rental Property Insurance

Before purchasing rental property insurance coverage you may want to consider a few things that may impact your policy.

#1 – A lot of landlords will make it mandatory for their tenants to carry renters insurance. It’s a good idea to make renters insurance part of the application process. Either having your future tenants show proof of coverage or make it so that they would need coverage before finalizing the lease. The great thing about this for renters is they may only have to pay around $20 a month for great coverage for their belongings.

#2 – Look into getting your insurance coverage from the same insurance provider. By doing this you may set yourself up to take advantage of a bundle discount.

#3 – Consider adding short term coverage to your standard insurance policy. This will give you the flexibility to rent the home for short periods of time if you need to.

#4 – Having your rental loss coverage the same amount as the gross rental income for the dwelling can help to ensure you have zero loss of income if the worst were to happen.

#5 – Ask an agent about additional landlord insurance coverage items such as added risk coverage for earthquakes, flooding, wildfires, burglary and more.