Last updated: November 1, 2023
Landlord insurance policy premiums are on the rise in Maryland, and most insurance agents are not incentivized to provide you with the most competitive coverage because they get paid a percent of your annual premium. Further, most agents do not specialize in landlord insurance and are captive to only one insurance carrier.
Headquartered in Baltimore, MD, OfferMarket Insurance is a landlord insurance rate shopping platform. In under a minute, you can shop 40+ carriers to get the best possible coverage at the lowest possible price. Every quote you get from OfferMarket is quality controlled by our team of landlord insurance experts. If you're looking to protect and grow your rental portfolio and increase your cash flow, get a quote and see how much you can save!
Landlord insurance is a bundle of insurance, similar to homeowners insurance, that is specifically designed for rental property investors. If you own rental properties in Maryland, landlord insurance is a critical component of your risk management and asset protection strategy.
Not all homeowners insurance policies are the same. It's important to understand the core components of a comprehensive landlord insurance policy and how to save money when shopping for your policy.
A comprehensive landlord insurance policy will include the following coverages:
🏠 property insurance ⚖️ general liability insurance 💸 business interruption insurance 🌊 flood insurance (if in flood zone)
The primary risks that landlords face is damage to the property. Property damage can occur for a variety of reasons, and whether you will be insured for a specific risk depends on which property insurance coverage you select. Property insurance can also cover the cost of temporary housing for tenants if the property is uninhabitable while repairs are being made.
There are three types of property insurance coverage, called "forms". Basic Form, Broad Form and Special Form. The types of risks insured under each form are referred to as "perils".
The most cost effective property insurance policy will only cover basic perils which include:
🔥 Fire 🌩️ Lightning 💥 Internal explosion
When you select a basic form property insurance policy, the following perils can be included with an extended coverage endorsement inn exchange for a higher premium.
🌬️ Windstorm 🥷 Civil commotion 🔥 Smoke damage (if not from fire, must result from sudden damage) 🌨️ Hail ✈️ Aircraft 🚗 Vehicle 🌋 Volcanic action 💥 Explosion 🥷 Riot 🏚️ Vandalism 🥷 Malicious mischief
When you select a broad form property insurance policy, the following perils are included in addition to the basic form and extended coverage perils.
🥷 Burglary damage 🧊 Ice, sleet, now (weight) 🪟 Glass (breakage) 🚰 Accidental discharge of water/steam 🧊 Freezing objects ✈️ Falling objects ⚡ Electrical current 🏚️ Collapse 💥 Tearing asunder
Special form covers all risks of direct physical loss except those specifically excluded in the policy. Anything excluded would need to be added as an endorsement or separate policy in order for you to be protected from the excluded peril. Common exclusions:
🌊 Flooding 🌎 Earthquake 🤡 Intentional damage ⚠️ Building code enforcement 🔌 Power interruption off premises 🇺🇸 Government seizure
General liability insurance protects you from liability if there is an injury or damage to someone's property at your rental property. Most landlord insurance policies for 1-4 unit rental properties will cover up to $500,000 per occurrence and $1,000,000 in the aggregate for the annual term of the policy.
If a tenant falls down the stairs and sues you, your general liability insurance will cover medical costs and legal fees. If a contractor gets electrocuted and takes legal action, you'll be happy to have liability insurance.
🚑 injury at the property ⚖️ lawsuit
In addition to these risks, landlords also face the risk of loss of income due to insured claims such as property damage from a storm that causes tenants to move out, leaving the property vacant. When tenants may move out unexpectedly, you can avoid loss of rental income with a landlord insurance policy that includes business interruption insurance.
Business interruption insurance is priced very reasonably, commonly $1 per $1,000 of rental income. So if your rental property is leased for $40,000 per year, and you have a $40,000 loss of rent limit, you should expect to pay an annual premium of $40 for this specific coverage which is bundled into your landlord insurance policy.
Flood insurance may be required if your Maryland rental property is located in a FEMA special flood hazard area (SFHA). You can use FEMA's National Flood Hazard Layer (NFHL) interactive flood zone mapping tool.
Are you using a DSCR loan to finance your Maryland rental property? DSCR loan guidelines have strict insurance requirements that can be frustrating to satisfy. If you're not working with an insurance agency that specializes in providing insurance for DSCR loans, you risk wasting time and money. Your insurance premium affects your DSCR which affects your loan amount. In order to qualify for the highest possible loan amount, it's important to get the most cost effective landlord insurance.
|DSCR Loan Insurance||Requirement|
|General Liability Insurance||Yes|
|Business Interruption Insurance (Loss of Rent)||Yes|
|Lender as Additional Insured||Sometimes|
The cost of landlord insurance in Maryland depends on several factors:
The cheapest property insurance option is Basic Form, and the most expensive option in Special Form.
|Property Insurance Type||Cost|
|Basic Form with Extended Coverage||$$|
The single largest contributor to the cost of your landlord insurance policy is the dollar value amount of dwelling coverage you select. If you buy a $200,000 rental property, depending on your lender's insurance requirements, you can insure it for less than replacement cost on up to replacement cost. If replacement cost is $200,000, you may decide you only want $150,000 of coverage. We always recommend insuring your rental property for full replacement cost value (RCV). Replacement cost value is based on a replacement cost estimate calculated by the insurance carrier. Sometimes your replacement cost estimate will be considerably higher than you believe it would cost to rebuild the property in the event of a large loss. This may lead you to select less than RCV, or an Actual Cash Value policy.
|Actual Cash Value||$|
|Functional Replacement Cost Value||$$|
|Replacement Cost Value||$$$|
The higher your deductible, the lower your annual premium. Many rental property investors choose a $5,000 deductible instead of a lower deductible such as $1,000. This means that in the event of a covered loss where a claim is filed, you pay $5,000 and the insurance carrier pays the remaining amount up to the limit of insurance. So if you have $50,000 storm damage, you would pay $5,000 and your insurance carrier would pay $45,000 for the property to be repaired.
If the property is in an area with a high risk of peril (i.e. vandalism, theft, fire), the cost of insurance will be higher. This is important to be aware of if you are in the process of searching for your next rental property. The safer the area, all else equal, the lower your insurance premium.
The worse your property condition, the more expensive your insurance.
While landlord insurance is a critical component of your risk management and asset protection playbook as a rental property investor, it's not the only way to protect yourself and your investment.
In rental property management, an ounce of prevention is certainly worth a pound of cure. Especially in cities such as Baltimore where tenant-related risks are well documented (i.e. house fires, Section 8 Housing Choice Voucher Program tenant property damage). We recommend conducting a credit report and background check for each adult applying to live in your rental property. Set firm guidelines for minimum credit score and background items that are grounds for immediate disqualification.
We recommend inspecting your property quarterly to ensure items that start small don't end up becoming major issues. In Maryland, the climate can be damp with periodic rain storms. Water intrusion is something to be particularly vigilant about. Make sure there are no roof leaks, basement leaks, or mold.
Teach your tenants about the importance of reporting maintenance items proactively. Teach them how to replace air filters, shut off the water main, and let water faucets drip during periods of extreme cold to avoid frozen pipes that burst and cause flooding, water damage, and mold.
In Maryland, you have many choices when shopping for landlord insurance. Ultimately, your selection comes down to the risks you are willing to accept and the price you are willing to pay. We recommend a comprehensive landlord insurance policy that includes property insurance, general liability insurance, business interruption insurance and, if necessary, flood insurance.
Working with an insurance agency headquartered in Maryland that specializes in landlord insurance is a sure way to get the best coverage at the best price. Get your landlord insurance quote today from OfferMarket Insurance!
Everything you need to know about landlord insurance is featured and regularly updated on our primary Landlord Insurance article.