Calculating Rental Property Insurance Cost
On average, the national average rental property insurance cost is about $1,353 per year. It’s slightly higher than that of a homeowner’s insurance, about 25-30% higher, because of the unique hazards involved in renting out your rental properties to tenants. With this in mind, you should understand what your rental property insurance cost covers and doesn’t cover. You should also know what you’re not covered for in your policy and what you need to have covered if you want to be covered in those areas. These are all things you should consider before purchasing a policy for your rental property. Of course, we’ll discuss some of these matters in more detail below.
The first area you should look at is what your rental property insurance actually covers for. This is generally something called an “endorsement”. An endorsement is simply the insurance policy that comes with your rental property coverage from your original homeowner’s insurance policy. So basically, if your house was destroyed by fire, smoke damage or other means, your insurer will provide coverage for your replacement costs, minus your deductible.
But what does this mean for you? If your existing homeowner’s insurance only covers the cost of repair to the physical building itself, your new rental insurance must cover the actual value of your rental property, which may include wear and tear on the building itself, damage to any furnishings inside, as well as anything else you own that’s attached to your property (including jewelry). Many insurance companies will also require you to purchase “wear and tear” coverage on all of the contents in your rental property. And some insurers will offer their customers special deals just for tenants who purchase “wear and tear” insurance with them.
Another area you should review is what kind of coverage you have in place for “personal liability”, or claims against you for things that happen beyond your control. For example, if you have pets, is it recommended that you insure them separately from the rest of the household? Many policies will not cover damage that is caused by your pets as long as you’ve taken precautions to prevent them from damaging your belongings. While you may want to consider some kind of pet insurance or another, sometimes it’s not necessary. In fact, if your existing homeowner’s policy covers “personal liability”, it may be a good idea to consider getting a separate policy to cover things like damage to your car, etc.
If you’re thinking about insuring your rental property through renters’ credit, there are some considerations to keep in mind. Often, there is a limit on the amount that can be claimed under this type of policy. The limit is set by your insurance company, but typically it is around $3k for a year’s worth of coverage. Also, tenants often cannot take out full-ownerships of their homes, so they cannot increase their coverage to include damage that is not caused by the tenants.
When considering whether or not to include additional coverage options with your rental property insurance, it’s best to do some basic research. What are the typical policies offered by most insurance companies? How much do they cost? What are some of the things that you can expect to get covered? And lastly, how much additional coverage options may be available to you as a landlord?
If your property has tenants, you need to decide whether or not you wish to include medical costs coverage in your rental property insurance. A lot of insurance companies will include some form of medical costs coverage with your basic insurance. Usually, the coverage is only temporary and only to cover things like prescriptions, office visits, and emergency rooms. You may be able to purchase additional coverage for “out of pocket” medical costs if the tenant has an accident or illness. It’s wise to talk to your insurance agent and get a clarification about what the company offers if you have a tenant who becomes ill or has an accident that you are responsible for paying for. Some companies may not offer this type of insurance but are okay with you buying it as an add-on.
Another popular option for rental income insurance is to include liability coverage. This will protect you in the event that a third party slips and falls on your property. It usually covers things like property damage (including water or fire damage), personal injury, and property destruction. However, this option will also probably not cover any legal fees that you would owe your tenant if the tenant sued you for damage or illness.