How Much Landlord Insurance Costs For Owners

Landlord insurance is a type of insurance policy purchased for property leased to tenants or guests. Without the right policy, a claim could get denied. Landlords can expect to pay about 20% more for landlord insurance than a regular homeowners insurance policy because the risk of loss is greater on a business property. 

The best way to get landlord insurance is through Obie. Obie shops your insurance coverage to many insurance companies, getting you the best possible rate. It’s available in all 50 states. Get a free quote now.

National Average Annual Premium for Landlord Insurance

Rates vary widely from property to property. The national average for landlord insurance is $1,288 per year. Where your property is will affect its rates.

Landlord Insurance Cost Factors

Many factors go into pricing a landlord insurance policy. Insurance companies consider: 

• Size, building materials: The size and building materials the home is made from are used to generate a rebuilding cost if the house were to burn to the ground.
• Age: The age of the home can increase the chances of something going wrong.
• Location: Is your home in a natural disaster zone? The risks associated with where the home is will affect the price of a policy. 
• Claims history: The more claims you have, the more expensive your policy will be.  

Landlord Insurance Cost Example

Your insurance premium will have several line items of coverage. Each may impact your total premium, including which insurance company you choose. 

Landlord Insurance Cost vs. Homeowners Insurance Cost

Landlord insurance is more expensive than homeowners insurance. The reason comes from the risk of renting to tenants who are less likely to care for the home as a homeowner would. This increases the risk of loss. There is a higher liability risk with business property. Property owners can expect to pay 20% more in landlord insurance than traditional homeowners insurance. 

Types of Landlord Insurance

There are three types of landlord insurance: DP1, DP2, and DP3. The coverage in each type is slightly different. Landlords should review policies to fully understand what is covered and what isn’t. 

DP1

The DP1 is a named risk policy with limited coverage. It covers losses associated with perils listed in the policy that includes:

• Fire and lightning
• Explosion
• Windstorm and hail
• Riot and civil commotion
• Smoke
• Aircraft
• Vehicles
• Volcanic explosion
• Vandalism and malicious mischief

The DP1 will not cover other losses. Because it is limited in scope, it is the least expensive of the three rental dwelling policies. 

DP2

The DP2 is also a named risk policy with the covered perils listed in the policy. It differs from the DP1 because a longer list of perils is covered. The perils are: 

• Fire
• Lightning
• Explosion
• Windstorm and hail
• Civil commotion
• Smoke
• Aircraft
• Vehicles
• Volcanic eruption
• Riot
• Vandalism and malicious mischief
• Burglary damage
• Weight of ice and snow
• Glass breakage
• Accidental discharge of water or steam
• Falling objects
• Pipe freezing
• Electrical damage
• Collapse
• Tearing apart, cracking, burning, bulging

This policy is more expensive than a DP1 but less expensive than the DP3 rental dwelling policy. 

DP3

The DP3 is the most comprehensive rental dwelling policy and is considered the one most landlords should get. It is known as an all-peril policy, meaning it protects against all perils except those excluded explicitly by the policy. The exclusions are:

• Ordinance or law
• Earth movement
• Flood
• Power failure
• Neglect
• War
• Nuclear hazard
• Intentional loss
• Governmental action
• Mold

Because it is the most comprehensive policy, it is the most expensive policy a landlord can get. However, because of its broad scope of coverage, it is also the most common policy sold to landlords. 

How to Reduce Landlord Insurance Costs

Like all business owners, landlords want to limit their expenses. Keeping insurance costs down is important to a landlord’s bottom line. You can reduce landlord insurance costs by:

• Raising the deductible
• Keeping good credit
• Being claims free
• Shopping for the best rate

Landlord Insurance Tax Deductions

The IRS considers the premium paid for rental insurance to be 100% tax deductible. It is regarded as an ordinary business expense. The deduction can be taken on a business tax return or a personal tax return if the property is held in the landlord’s name and they file Form 1040. 

Takeaway

Landlords can’t get away from getting a more expensive insurance policy that covers the rental property. Landlord insurance is required on properties that are leased out, whether that is long-term or short-term. Landlords should shop for the best rate possible among top carriers such as Obie. 

The best way to get landlord insurance is through Obie. Obie shops your insurance coverage to many insurance companies, getting you the best possible rate. It’s available in all 50 states. Get a free quote now.