Why Landlord Insurance is Necessary?

Dealing with a tenant who either won’t pay rent or absconds without warning is an expensive ordeal that will cost you thousands of dollars. That’s because you’ll need to pay expenses ranging from legal costs (for eviction), to your monthly mortgage repayments.

Sadly, by the time you finally get a better tenant to fill your vacancy, you may have lost 2 – 3 months worth of rental income. But if you protect yourself with a landlord insurance policy, you can reduce the financial impact of a bad tenant.


How much Does Landlord Insurance Cost?

Most landlord insurance policies have an annual premium that’s factored from a percentage of your annual rental income, which can be as low as 1.25%.

So if your monthly rent is $4,500, here’s a look at how much your premium would cost:

$4,500 monthly rent X 12 months X 1.25% = yearly premium of $525

Keep in mind that many landlord insurance providers have a set minimum for a policy premium, usually $250.


What Will Landlord Insurance Cover?

Once you take out a landlord insurance policy, you’ll gain coverage for a variety of incidents. Depending on the type of claim you’re making, you’ll need to pay a deductible of about 1 – 2 months’ rent.

Here’s a list of incidents most landlord insurance providers cover:

  • Absconding Tenant(s): When your tenant(s) decides to leave without notice, skipping out on rent and forcing you to find another tenant quickly.
  • Rental Default: When your tenant(s) cannot pay afford to pay their rent because of retrenchment, debt, etc.
  • Lost Rent from Property Damage: When tenant(s) damage your property, making it difficult to rent out.
  • Lost Rent from Inaccessibility: When a manmade or natural event blocks access to your property.
  • Lost Rent from Murder/Suicide: When you cannot get a tenant because your previous tenant committed murder/suicide on your property.
  • Lost Rent from Death of Tenant: When your tenant dies on your property rendering it unavailable for immediate rental.
  • Eviction: When your tenant(s) won’t vacate your property until you get the legal authority for eviction.