Landlord insurance: Protect your rental investment with confidence

Whether you’ve just bought your first rental property, are planning to build one, or have been in the rental game for a while, you know just how tough it can be to juggle all your responsibilities as a real estate owner. It’s practically a full-time job answering tenant calls, fixing leaky faucets, coordinating maintenance work, keeping up with inspections, preparing for showings and move-ins. The last thing you need is the added stress of figuring out how to pay for damage after a bad windstorm or a sudden fire.

That’s where landlord insurance can come in handy! When you get landlord insurance coverage, you can set your future self up for success, protecting your real estate investment from all sorts of financial consequences. Not sure what landlord insurance is, or if it’s the right insurance for you? Read on to find out why you might want to get it and how it could make things a little easier for you.

Landlord insurance covers building owners for risks related to their rental properties. Sometimes also called rental property insurance, building owner insurance or commercial property insurance, landlord insurance can be a lifesaver for both commercial and residential real estate owners.

Landlord insurance may be a good fit for you if you own rental property, but don’t live in the building. That second part is key here: if you live in the building, your home insurance might be all the coverage you need. We recommend speaking with an insurance agent about your specific situation. However, if you don’t live in the building, your home insurance won’t cover your rental properties—and that’s where landlord insurance comes in.

Landlord insurance can cover a wide range of rental properties, including:

• Residential buildings: Everything from single-family homes to duplexes, triplexes and apartment buildings (more specifically, for longer-term rentals)
• Commercial buildings: Buildings or strip malls with one or more businesses, such as retail stores, restaurants and entertainment
• Shopping centres: Typically one or more buildings containing major chain retailers and other services like restaurants, banks or a post office, grouped around a parking lot and located in an urban or suburban area
• Office buildings: Buildings occupied by office spaces (may be multi-storey and include other commercial uses)
• Mixed-use buildings: As the name implies, buildings that contain both residential and commercial tenants

Landlord insurance is designed to protect rental property owners from risks specific to their business—building or structural damage, loss of rental income, equipment breakdown, and liability—plus add-ons that fit their needs.

Say the unthinkable happens: your rental property catches fire, and there’s a lot of damage.

Maybe the fire was contained to the laundry room, and the washers and dryers provided for tenant use have to be replaced. Luckily, your landlord insurance provides coverage for appliances belonging to you in your building and in your units (fridge, dishwasher, oven), as well as furniture and equipment in common areas (like a treadmill in a gym).

But what if the damage was more extensive? With adequate landlord insurance, the costs to tear down and rebuild the structure could be covered, once you’ve paid your deductible.

So you’re rebuilding because of that fire in your rental property. That means your tenants have to move out temporarily—and thankfully, your policy may be able to help cover those costs.

But what if they find another lease in the meantime, and their temporary move turns into a permanent one? This is another situation where your landlord insurance could kick in. With the right coverage, you could be reimbursed for the rent lost during rebuilding and until you find new tenants, sometimes for up to 24 months after the fire.

Sometimes problems arise not because of some big fire or storm, but because of a little short circuit that causes a key piece of equipment, like an air conditioning unit or smart lock on the front door, to suddenly break down. Your landlord insurance can help save the day again, covering repairs or replacements for electrical, electronic, pressurized and mechanical equipment that stops working by accident. And if there’s damage to your property because the heater stopped working in the middle of winter, for example, your policy could help cover that too.

Another way landlord insurance could protect you? Stepping in to cover financial losses and legal fees incurred due to third-party bodily injury or property damage. So, if one of your tenants slips on icy steps at your rental property, your policy could protect you if they decide to take you to court. Or if that fire from earlier started in your building and spread to the neighbours’, your landlord insurance may be able to offer legal assistance and help you settle the damages.

You can also add other coverage to your policy for protection that meets your needs. These add-ons could help cover damage caused by:

• Roof water: Water that gets in through the roof
• Sewer backup: Overflowing septic tanks or water that enters through floor drains
• Flooding from an overflowing body of water: High waters after a windstorm or surface water following heavy rainfalls
• Earthquakes: Including damage from avalanches, landslides and other ground movement caused by quakes

Another add-on you might be surprised to hear real estate owners benefit from is cybersecurity. All it takes is clicking the wrong link in the wrong email, and your tenants’ sensitive information, not to mention your business’s, is in the wrong hands. This coverage can help limit your financial loses related to data theft, phishing, viruses, malware and cyberattacks (with or without ransom demands). In today’s tech-driven world, it pays to take precautions!

Landlord insurance may cover sudden or accidental damage to your building, plus the contents and equipment that belong to you, but it won’t cover damage to your tenants’ personal property, normal wear and tear, pests, hidden defects or certain natural disasters (depending on your coverage):

• Tenants’ personal property: Say the stove is damaged by a cooking fire and goes on the fritz—if it’s yours, your landlord insurance could cover the replacement cost, but if it’s theirs, they’d need to go through their tenant insurance.
• Normal wear and tear: Properties age over time, and it’s normal for buildings to start to show it. Landlord insurance is designed to protect you from sudden accidents, not damage to be expected from aging or poor maintenance.
• Pests and other vermin: Nobody likes rats, bedbugs or termites—and it falls to you as the real estate owner to keep up with preventive measures to make sure they don’t show up.
• Hidden defects: If there’s a serious, pre-existing flaw with the property—even if you weren’t aware of it—then the issue isn’t sudden or accidental. That means it doesn’t fall under your insurance coverage.
• Some natural disasters: This last point really depends on the coverage you take out. If you want coverage for specific disasters like earthquakes or flooding, be sure to speak with an insurance agent about adding it on.

Real estate is a major asset. As a building owner, you’re entrusting your investment to the care of your tenants. Most tenants look after their rental like it’s their own, but sometimes you get a tenant who’s a little less reliable. Plus, there are significant risks to owning rental property, unrelated to your tenants: accidental fires, loss of rental income, equipment breakdown. Knowing all this, it can be helpful to protect your investment with landlord insurance.

The short answer is no, not technically. There’s no law requiring you to have landlord insurance.

But—the majority of loan providers generally require proof of landlord insurance before signing a mortgage. For lenders, landlord insurance is a way to protect their investment, just as it is for you. You never know when a bad break might come—and if your property is a total loss, your policy may protect you from bankruptcy. It’s the smart choice, then, to pay a small monthly premium to avoid a massive loss down the line. Think of your insurance payments as an investment in a stress-free future.

Like with any insurance policy, there are many factors that can influence your premium. Some of these include the type of building (residential, commercial, mixed use), its age and the cost to rebuild, its location, its use, as well as your policy’s level of coverage, optional add-ons (such as flooding, earthquake or cyber), deductible and claims history. If you want to dive into how each factor affects your premium, you can learn more about how much small business insurance costs.

Now that you know why it’s so important to take out landlord insurance, and what factors influence the premium, you’re probably looking for ways you can save without losing out on protections afforded by your policy.

An important factor that insurers often look for is whether a building has a monitored fire and burglary alarm system. Monitored systems offer an extra level of protection by automatically notifying a third party if a break-in or fire is detected. The third party then immediately alerts the proper authorities for dispatch, minimizing the damage and losses incurred on your property.

Similarly, installing a water leak detection system could also cut down on your premium. With these systems, a central control module is connected to a series of water detectors placed near plumbing fixtures and appliances that use water (dishwashers, washing machines, water heaters). When one of the detectors identifies a leak, an electric valve is immediately shut off, limiting any major water damage. Even the smallest water leak can cause extensive damage, so detection and prevention are key to helping keep your property safe and your premium down.

Still looking for other ways to save? If you have multiple rental properties that need insurance, you might be able to save by bundling your policies with the same insurer. Another option is to adjust your deductible—but it’s important to make sure you have the emergency funds available to cover your deductible, should anything happen.

Even with all this information, it can feel overwhelming to try to figure out the right deductible and coverage for your properties. That’s why it’s always a good idea to speak with an insurance agent about a solution that’s customized to you. And don’t feel you’re locked in to the first insurance provider you speak with—you can learn a lot about the options and pricing available by comparing multiple quotes!

1. If you’re a landlord, your home insurance won’t protect a rental property if you don’t live on the premises—but landlord insurance will. Plus, landlord insurance offers more extensive coverage options that meet your needs as a real estate owner.
2. Landlord insurance protects you against damage to your rental property, loss of rental income, sudden equipment breakdown and liability. Plus you can add on other protections that meet your specific needs.
3. While landlord insurance isn’t required by law, it’s a smart investment in a stress-free future that is very often required by mortgage lenders.

Call 1-866-472-8848 for more information!

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