When to Buy Landlord Insurance

Landlord insurance can help protect you from financial risk and legal liability while renting out a property to tenants. So, having the right coverage in place at the right time is essential. But when is the “right time” to reach out to a provider, get a quote, and purchase a policy?

The fact is, the right timing often comes down to your personal situation; there are different timelines depending on whether you are buying property or already own it, who your lender is, and other factors. In this article, you’ll discover:

• Why landlord insurance is important
• When to buy landlord insurance
• When and why to re-evaluate an existing landlord insurance policy 

Why Is Landlord Insurance Important?

If you already own a home, you might assume that your homeowners insurance policy’s coverage will extend to your rental property. However, homeowners insurance typically only covers owner-occupied homes. Attempts to make a claim using homeowners insurance for a rental property may be denied by your insurer. 

That’s where landlord insurance comes in. As a rental property owner, landlord insurance can provide financial protection in the event of a covered loss. But if your rental property has insufficient coverage or is only protected by a homeowners policy, your loss may not be covered. 

 A landlord insurance policy generally provides coverage for the following:

• Property damage such as damage from natural disasters, faulty pipes or wiring, or criminal activity (i.e., break-ins or vandalism) 
• Liability claims for medical costs, legal fees, and settlements resulting from injuries that occur on the property  
• Loss of rental income due to covered losses, such as fire or water damage, that prevent occupation of the property

In addition to a landlord insurance policy, you may also want to consider obtaining an umbrella insurance policy to fill in any gaps in coverage. An umbrella insurance policy can offer coverage above and beyond an existing policy’s limit, providing an extra layer of protection against potential losses. 

When to Buy Landlord Insurance 

While the exact timing of your landlord insurance purchase may vary depending on your situation, it’s important to have the right coverage in place before closing on a new property, before your first tenants move in, and always before disaster strikes. 

Before Closing on a New Property

Most lenders require insurance at the time of closing. As such, it’s typical for landlords to buy landlord insurance with an effective date that coincides with the closing date of their rental property.  

Many insurance companies have quote expirations of 30 to 60 days, making it important to shop around for coverage prior to an accepted offer. The sooner you start looking at quotes, the sooner you can decide on the right provider for your real estate investment. In addition, getting a landlord insurance quote can help you understand what the approximate monthly costs will be on the property.  

It’s also important to keep in mind that many insurance providers don’t allow same-day binds on their policies (although many allow next-day binds). And depending on carrier rules, coverage may not be effective for 1 to 60 days after a policy is bound. That’s why taking out a landlord insurance policy first-thing can help you make the most of your policy and the most of your real estate investment. 

Before Tenants Arrive

As soon as others step foot on your property, you open yourself up to liability risks. For example, imagine a prospective tenant trips on a rug at your property and breaks their leg during a tour. As the landlord, you may be held liable for their resulting medical expenses. So, having the appropriate coverage in place as soon as the property becomes available for rent is critical for protecting yourself against financial loss and legal liability. 

Before Disaster Strikes

Of course, no one can predict when an issue like a natural disaster will arise. But not having coverage for such events can make it difficult for you and your property to recover. 

Think about it this way: If you were in a car accident and didn’t have car insurance, you wouldn’t be able to insure your vehicle and file a claim on that accident after the fact. Similarly, if a tree falls on your roof, fire damage occurs, or other issues arise, you can’t take out a landlord insurance policy and expect to have the loss covered. Also, you generally have to disclose any insured or uninsured loss to insurance providers when you seek to obtain coverage. 

When to Review an Existing Policy 

To prevent being underinsured or overpaying for coverage, you should typically re-evaluate your existing landlord insurance policy on an annual basis. You can also usually adjust your coverage at other times throughout the policy term as needed. Here are a few events that indicate it’s time to review your policy:

You Just Finished Major Renovations or Repairs

If you’ve completed any major property renovations during your policy’s term, such as updating the kitchen or bathroom, you may be left underinsured by your current coverage. Since renovations can increase the value of your property—and in turn increase the amount of money needed to rebuild the structure or replace belongings in the event of a loss—you may need to increase or change your coverage to properly insure your rental property. 

In addition, changes made to the property to mitigate potential future losses like replacing the roof or upgrading old plumbing may qualify you for a lower premium depending on your carrier. Upgrades may better protect your property against risks like structural, water, or electrical damage. They can also help reduce the likelihood or cost of any potential claims. 

The Property’s Area Risk Has Changed

If the area’s risk changed over the course of a policy term, it may be time to re-evaluate your coverage. For example, properties located in areas where large-scale storm damage or natural disasters are likely to occur may see higher premium rates.

Even if the exposure to the peril hasn’t changed, the perception of the risk might have. For instance, if an insurance carrier decides to leave a market based on modeled losses, other carriers might view the area as too risky to remain. As an area’s risk or perceived risk changes, re-evaluating your existing coverage is key for maintaining the correct level of protection.  

The Property’s Value Has Changed

In real estate, the only constant is change. Local real estate trends and the wider housing market, as well as a property’s condition, age, location, and property size can all impact value. Depending on how your property’s value changed throughout your policy term, you may be underinsured or overpaying for coverage. For example, great school districts, a variety of places to eat, ease of access to transportation, and amenities like public parks and services can impact your home value. 

Even if your home’s market value hasn’t changed, shifts in supply chains and other economic factors can impact your property’s replacement cost value. While some insurers track these changes and automatically adjust your premiums to account for things like increased labor and construction costs, others may not. 

Obtaining Coverage

Ultimately, obtaining the right coverage at the right time can ensure that your rental property and income are protected. Making sure that coverage remains sufficient by re-evaluating it regularly can keep you from being underinsured or overpaying for coverage. 

If you’re a landlord or thinking about purchasing rental property, finding the right provider is essential to protect you and your real estate investment. Obie can help you obtain the proper coverage for your rental property by giving you a free, instant quote that’s customized for your property.  Our coverage is designed with investors in mind, so you can get coverage quickly, exactly when the time is right.

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