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How to Select the Best Landlord Insurance [Guide]

Read time: 5 minutes

Let’s talk money.

Your rental property is a source of income. So, what happens:

  • If it’s damaged and can’t be rented?
  • If you are sued?
  • If your building is uninhabitable?

Answer: You lose money, big time!

One of the best ways to avoid this is to protect your property with the right landlord insurance policy. Follow our steps below to select the best landlord insurance policy with your local, independent agent.


Select your best landlord insurance policy:

  1. Choose coverages for your policy
  2. Choose additional coverages you may need
  3. Set your policy limits
  4. Get a quote

Read more: What is an Independent Insurance Agent? Everything You Need to Know

What is landlord insurance called?

Rental dwelling  or dwelling fire is what most insurance companies call the insurance policy they provide for properties you own and rent out to others. So, when you are shopping for your landlord insurance, you will likely be referred to a rental dwelling or dwelling fire policy.

Learn more about our Rental Dwelling policies and ways to save.  

What does landlord insurance cover?

Landlord insurance protects your property from covered losses, like a fire. It can also protect you and others listed on your policy from liability claims resulting from you owning your rental property.

So, to break that down, your property coverage can help in situations like when there is a big storm and one of your trees falls and damages your rental building. The property coverage of your policy can pay for damages to your building (subject to the terms of the policy).

Your property coverage will also likely cover damages from:

  • Lightning
  • Fire
  • Wind

In addition to your building, your policy may also cover the following types of property:

  • Outdoor equipment used to maintain and service your property (like a lawn mower)
  • Other structures on your property as outlined in the policy

Your liability coverage can help in situations like if a tree falls from your property onto your neighbor’s and they make a claim against you for damages.

Bear in mind, that insurance is not a substitute for and would not pay for regular maintenance such as tree trimming or removal.

Your policy’s liability coverage is also there for situations when you are seen as responsible for damages or injuries, like:

  • If somebody gets a minor or major injury on your property (this does not apply to tenants)

You may also talk to your agent about additions to the liability section, which may also provide coverage or a defense:

  • If you are accused of wrongfully evicting a tenant
  • If you enter a tenant’s space without their consent
  • If you take a photo of a tenant in their space without their consent

1. Choose coverages for your policy

As we described above, most standard landlord insurance policies will consist of coverage for both property and liability. For your property coverage, you will need to select a settlement option.

These settlement options are essentially how you want your insurance to help you cover the costs you incur from repairing or replacing your property after a covered loss.

  • Replacement Cost Loss Settlement: This option pays up to the amount you actually incur to repair or replace your property with materials of similar kind and quality at their current price. As always, this is subject to applicable policy limits.
  • Actual Cash Value Loss Settlement: Pays the actual cash value of your rental after a covered loss. This will factor in depreciation based primarily on age and condition of your property.
  • Functional Replacement Cost Loss Settlement: If your rental was built before 1940, you may want to consider this option. It provides replacement or repair of your rental with current construction materials that function the same as your original construction, but aren’t as expensive.

    This is a nice option if you’re not concerned about keeping the old-style construction materials in your home. For example, if your original plaster walls are damaged after a storm, this coverage will likely pay for new drywall to repair the damage. Repairing your original plaster walls with plaster would take much longer than using more current and common materials like drywall.

For your liability coverage, you can choose to stay with the standard liability coverage, or you can add landlord liability coverage to your policy.  

If you choose landlord liability coverage, your policy may also cover:

  • If you are accused of wrongfully evicting a tenant
  • If you enter a tenant's space without their consent
  • If you take a photo of a tenant in their space without their consent

Read moreYou Need to Tell Your Insurance Agent about Your Home Improvement Projects, Here’s Why

2. Choose additional coverages you may need

Beyond your standard landlord insurance policy, you can add on additional coverages. These are optional but worth considering:

  • Water and Sewer Back-Up: Provides limited coverage for backed-up sewers or drains.
  • Loss of Rents: If your rental is uninhabitable or cannot be rented due to a covered loss, this covers your loss of rental income.
  • Equipment Breakdown: Covers some electrical and mechanical failures of equipment at your rental home.
  • Personal Property coverage: Protects your personal property like furnishings for the dwelling such as appliances, furniture etc. at their depreciated value. Also, keep in mind, this does not protect tenant’s property.
  • Burglary coverage: If your rental experiences a break in, this covers your items that are stolen. Again, remember, this does not cover any tenant’s items that may be stolen. Tenants can purchase Renter’s insurance to cover items stolen from them.

Learn more about all our optional coverages for landlord insurance.

Next, you need to select your policy limits. 

3. Set your policy limits 

Just about every insurance policy has a limit.

Your insurance policy’s limit is the most your insurance will pay toward a covered loss. If your damages exceed the limit, you may need to pay out of pocket for part of the loss.

You will need to select a limit for your property coverage and your liability coverage.

Let’s start with your property limit.

This is how much coverage you will have in the event you need to repair or replace your rental property after a covered loss.

First, consider the settlement option you chose for your rental property. This will help you determine a limit.

  • If you chose to insure your rental with the Actual Cash Value Loss Settlement coverage, you and your agent can work to calculate the actual cash value and set it as your limit.
  • If you chose either the Replacement Cost Loss Settlement or the Functional Replacement Cost Loss Settlement, you will likely need to set a limit different than the market value of your building. You can work with your agent to figure out a replacement cost estimate to help determine your coverage amount.

This is yet another reason why talking with your local, independent agent is so important. They are well-versed in setting appropriate limits and can help you calculate these factors.

Next, let’s look at your liability limit.

It’s important to remember that liability isn’t easy to estimate because the incidents can vary so much in severity. This is why talking to your independent agent is so important.

You will want to choose a limit sufficient to protect your family, rental business and assets from potential liability claims. Provide your agent with these details so they can help determine the best limit to protect you.

4. Find an agent for a quote

This could easily be the first step! But, now that you have a better idea of what coverage options you may want, it’s a great time to reach out to your local independent Auto-Owners agent.

Enter your ZIP into our Agency Locator to work with one of the many experienced agents near you.

Really, the most important step is getting your policy to protect your investment and source of income. We hope our quick guide helped you understand the process and feel confident reaching out to your local independent agent.

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*Products referenced may not be approved/available in all states. Limitations and conditions may apply. Premium will be based on benefits chosen and policy rates available at time of application.

Disclaimer: This article is not expert advice. The analysis of coverage is in general terms and is superseded in all respects by the Insuring Agreements, Endorsements, Exclusions, Terms and Conditions of the Policy. Some of the coverage mentioned in this material may not be applicable in all states or may have to be modified to conform to applicable state law. Some coverages may have been eliminated or modified since the publishing of this material. Discounts may not be available in all states. Limitations and conditions may apply. Premiums will be based on benefits chosen. Please check with your local Independent Auto-Owners Insurance Agent for details."