May 13, 2022
  • May 13, 2022

The 5 Best Rental Property Insurance Companies of 2021

By on July 19, 2021 0


What is rental home insurance?

Rental home insurance, or homeowner’s insurance, is very similar to traditional home insurance, but with a few important differences. Rental property insurance protects the property itself, usually up to its replacement cost, but sometimes up to the purchase price or some other predetermined value. Insurance also typically protects a home’s critical systems, such as electrical, mechanical, and sewer systems, if damaged due to an accident.

Most policies even include personal property protection. However, as renting real estate is a business, rental property insurance also includes coverage that is not standard in normal home insurance. More specifically, homeowner’s insurance protects homeowners against loss of use of their property due to a covered event. After all, if a tree falls on your investment property, your tenants will need a place to go. If they have a lease, you have an obligation to provide them with suitable housing. Without rental insurance, you could end up paying to stay in a hotel or Airbnb for the duration of their lease.

If you have a mortgage on your rental property, your mortgage lender will likely ask you to purchase home insurance. Even if your tenants buy home insurance, there are things that you will still be responsible for. Damage from things like electrical fires can be a big source of liability for homeowners, especially if a tenant is injured as a result.

What does rental property insurance typically include?

What is covered by rental property insurance varies widely depending on the type of property to be insured, its location and loss history. However, most policies cover the property itself, bodily injury to tenants or their guests considered to be the fault of the landlord, and personal property to a small extent. Coverage usually comes with several stated limits, including:

  • Protection of property: usually the calculated replacement cost or cash value
  • General civil liability: Usually two to four times the property coverage limit to protect against things like personal injury
  • Personal property: Usually a face value to cover things like home appliances or owner’s equipment stored on site

When homeowners choose coverage limits for their rental home insurance, most choose to insure a property up to its replacement cost, which is the cost they would have to pay to replace the home if it was burning, for example. However, some insurance companies allow homeowners to insure their property up to the purchase price (which may be higher or lower than the replacement cost) or other declared value.

Regardless of which coverage homeowners choose, insurance companies will not pay homeowners more than the value of damage to a property during a covered event.

What does rental property insurance generally exclude?

Rental property insurance is important to landlords, even if their tenants have rental insurance. And, while homeowner’s insurance covers a lot of things, there are some things that aren’t included. Title insurance, for example, is not covered by a policy. Homeowners are also not protected against wrongdoing or negligence – if, for example, there is a fire on their property due to an issue they were aware of and have not addressed.

Rental home insurance also does not cover the cost of owning an unoccupied property, except in the event of a covered event (a tree falls on the house, for example). If landlords just don’t bother to find a new tenant after the move, their insurance won’t pay for the lost rental income.

Most rental property insurance policies also do not include coverage for damage resulting from natural disasters (such as floods or hurricanes), unless homeowners specifically opt for these additional coverages ( at an additional cost).

What are the expected costs of rental property insurance?

Rental insurance costs depend on the type of property to be insured (house, condo, multi-family, long-term or Airbnb) as well as the location, up to a specific address. Insurers also take into account factors such as whether a property is in a flood-prone area, whether the owner has filed claims recently, and even the insurer’s appetite to insure a property in a particular area.

Some insurers will even check a homeowner’s credit before committing to coverage. Homeowners can generally expect their annual rental insurance to cost about 25% more than a traditional home insurance policy each year, depending on coverage limits, personal liability protections, location and other additions.

Is paying for rental insurance worth it?

If you have a house that you are going to rent to tenants, you absolutely need to take out homeowner insurance. If you have a mortgage on the property, it’s probably even required. Not taking out a policy can put you in significant debt, up to hundreds of thousands of dollars if something does happen.

If you don’t have insurance, you may have to pay to repair or rebuild the property yourself. If you have rented the property to tenants when something happens, you may also be responsible for paying for their accommodation elsewhere while you make repairs. If one of your tenants is injured on the property and it’s your fault, you may even be held responsible for their medical bills and lost wages.

How to file a complaint

The process for filing a rental home insurance claim is a little different with each insurer. In many cases, the process can depend on whether your carrier has an adjuster in your area or whether they are outsourcing their claims to contractors. Typically, when something happens and you need to file a homeowner’s insurance claim, the process goes as follows:

  1. Mitigate the damage: If something happens that causes damage to your home, you need to take steps to stop further damage. For example, if water gets into the house, do what you can to stop it so that no further damage occurs.
  2. Notify the insurer: This may require a phone call or filling out an online form; do it as soon as possible once you have decided to file a claim.
  3. Document the damage: Your insurer may require that you provide photos of the damage as well as the area surrounding the property before any cleaning so that they can assess the cause of the damage.

Some homeowners insurance companies have mobile apps that you can use to file a claim and / or submit photos, while others require physical documents to document a claim. When you purchase coverage, your specific claims process will be detailed in your policy documents. It is important to read this information carefully so that you know what to do in the event of a disaster.

How we choose the best insurance companies for rental property

We’ve researched companies that offer coverage in many areas, even nationwide. We focused primarily on large, reputable companies with healthy finances and favored companies that clearly state what is included in their coverage (so homeowners know exactly what to expect from their insurance).

We have also reached out to agents and carriers and evaluated their response time and willingness to share details of the policies they offer. In total, we’ve reviewed over two dozen leading insurance and brokerage firms before compiling our list of the top five rental property insurance companies.

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