What You Need To Know About Landlord Liability Insurance


As perhaps one of the greatest real estate investing tenants of our time, risk mitigation ranks amongst every investor’s top priorities. It is the ability to reduce risk, after all, that makes the prospects of real estate investing so enticing. To that end, it is entirely possible for savvy investors to reduce their exposure to risk and essentially tip the scales in their favor. It is worth noting, however, that risk mitigation isn’t the result of a single strategy, but rather the end result of several strategies working in tandem. In fact, the more safety measures put in place, the better off investors will be. With that in mind, there is an often overlooked––but nonetheless important––strategy to reduce risk that passive income investors can’t ignore: landlord liability insurance.

What Is Landlord Liability Insurance?

Landlord liability insurance, otherwise referred to simply as liability coverage, is an insurance plan uniquely tailored to rental property owners. As its name suggests, landlord liability insurance isn’t meant for protecting primary residences, but rather the homes owners intend to rent out. More specifically, it helps rental property owners pay for any of the expenses they incur in the event someone suffers an injury on their property or if they are required to pay for the damages done to another home. Or, as Allstate so eloquently puts it, landlord liability insurance, more often than not, offers “coverage for the structure of the home, and also includes liability coverage that may help prevent you from paying out of pocket if you are found at fault in certain situations.”

In its simplest form, however, landlord insurance awards rental property owners the most valuable asset of all: peace of mind. With liability insurance for rental property assets, passive income investors can rest assured that litigation aimed in their direction won’t disrupt, or perhaps even ruin, their business. With the right insurance in place, passive income investors may simultaneously mitigate risk and save their assets.

[ What’s the best investment strategy for YOU? Take “The 10-Minute Real Estate Investor Personality Test” and find out ]

Liability insurance for rental property

Landlord Liability Insurance Coverage

Landlord liability insurance protects rental property owners from many of the same things a traditional homeowner’s insurance policy covers, but with a few additional exceptions. In addition to the average homeowner’s insurance policy, landlord liability insurance coverage may include, but is not limited to:

  • Tenant Damage: For what it’s worth, landlord liability insurance covers more than personal injury. As expected, landlord insurance also covers the excessive damage any tenants may inflict on the property. More often than not, landlord insurance will not cover the normal wear and tear tenants subject a property to, but it may cover excessive damages during and after the tenant’s stay.

  • Uninhabitability: As their names suggest, most uninhabitable clauses protect rental property owners in the event any rooms or the entire building isn’t fit to live in. For a number of reasons, ranging from construction to inspections, a home may be deemed uninhabitable. As a result, landlord liability insurance may cover the lost rent resulting from the vacancy. In some instances, landlord liability insurance coverage may cover up to a whole year’s worth of lost rent.

  • Tenant Injury: Landlords are responsible for the injuries tenants and their guests sustain on their property in more states than not. In fact, the majority of states will hold the landlord responsible for the injuries their tenants and guests sustain on their property, and any bills that result. As a result, most landlord liability insurance policies will cover any of the legal and medical bills brought about by injuries sustained on the owner’s property.

It is worth noting that not all landlord liability coverage is created equal. Landlord insurance for rental property assets can vary dramatically from state to state, and even from provider to provider. Therefore, it’s not safe to assume your own landlord liability insurance cost will cover everything I touched on above. Each of the items on this list are common landlord policies, but are by no means guaranteed to be present in your own policy. Before you buy your own landlord insurance or assume your own coverage, be sure to check with a professional to confirm what your policy does and does not include. Do not simply assume your own landlord liability insurance covers everything mentioned in this article.

Landlord Liability Insurance Cost

The cost of liability insurance for rental property owners is directly correlated to a number of key indicators, not the least of which is unique to each individual property. If for nothing else, there is no universal cost to account for liability insurance, as there are too many variables impacting too many properties. The cost of landlord liability insurance will, therefore, depend on the subject property in question, where it’s located, the provider, and a number of other factors. To that end, one thing is certain: the landlord liability insurance cost is worth it. As I already alluded to before, risk mitigation is of the utmost importance to real estate investors, and few things eliminate an investor’s exposure to risk more so than liability insurance. The cost an investor can expect to pay is well worth it. Perhaps even more importantly, it’s better to have landlord liability insurance and not need it than to need it and not have it.

Landlord Liability Insurance Summary

Today’s best real estate investors know it, and it’s about time you did, too: mitigating risk can very easily separate a good investor from a great one. Those capable of limiting the amount of risk facing each of their assets stand a better chance at realizing success, and landlord liability insurance is one of the many tools that can help them do so.

Key Takeaways

  • Landlord liability insurance is one of the easiest ways for rental property owners to decrease their exposure to risk.
  • The importance of liability insurance for rental property assets can’t be underestimated, and should be considered a necessary expense for investors.
  • The landlord liability insurance cost is well worth the amount investors will pay to protect their assets.