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Landlord Insurance
Last updated: April 23, 2025
"The first rule in investment is don't lose and the second rule in investment is don't forget the first rule." - Warren Buffett
What is Landlord Insurance?
Landlord insurance is a bundle of insurance, similar to homeowners insurance, that is specifically designed for rental property investors. Whether you own one rental property or hundreds of rental properties, 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.
Insurance premiums are on the rise, up over 25% in the last 18 months, and this directly affects your rental property's cash flow. Across our private lending and insurance rate shopping divisions, we review thousands of landlord insurance policies each year. We estimate that the typical landlord is quoted 27% higher insurance premiums than is necessary based on lender guidelines and landlord risk management preferences.
This is because many real estate investors get their landlord insurance policies from insurance agencies that do not specialize in landlord insurance. What's worse: these agencies are incentivized to sell you a more expensive policy because they get paid as a percentage of your premium. Even well-intentioned insurance agents commonly offer uncompetitive landlord insurance quotes because they're captive to one insurance carrier or lack specialization.
That's why we created the OfferMarket Insurance rate shopping platform. In under a minute you can shop 40+ carriers to get the best coverage at the lowest possible price. Your quote is quality-controlled by our expert team that specializes in saving money for rental property investors. Every month we save thousands of dollars for our clients, and we're excited to find out how much you can save!
What risks does Landlord Insurance cover?
A comprehensive landlord insurance policy will include the following coverages:
🏠 property insurance ⚖️ general liability insurance 💸 business interruption insurance 🌊 flood insurance (if in flood zone, technically a separate policy)
Property Insurance
The primary risk 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".
Basic Form Perils
The most cost effective property insurance policy will only cover basic perils which include:
🔥 Fire 🌩️ Lightning 💥 Internal explosion
Extended Coverage (EC) Perils
The acronym WCcSHAVVER is used to help remember all of the extended coverage perils that you can add to your basic form property insurance policy:
🌬️ Windstorm 🦹♂️ Civil commotion 🔥 Smoke damage (if not from fire, must result from sudden damage) 🌨️ Hail ✈️ Aircraft 🚗 Vehicle 🌋 Volcanic action 💥 Explosion ❗ Riot
V&MM is the acronym for vandalism and malicious mischief.
🏚️ Vandalism 🦹♂️ Malicious mischief
Broad Form Perils
BIG AFFECT is the acronym insurance agents use to remember all of the broad form perils that 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 Peril
The most complete property insurance is referred to as "Special Form", "open form" or "DP-3" for single family homes. Special form covers all risks of direct physical loss except those specifically excluded in the policy -- so be sure to read your policy to understand what is excluded! Common exclusions:
🌊 Flooding -- will need a separate flood insurance policy 🌎 Earthquake -- will need to add an earthquake "endorsement" 🤡 Intentional damage ⚠️ Building code enforcement 🔌 Power interruption off premises 🇺🇸 Government seizure
General Liability Insurance
General liability insurance protects you from liability if there is an injury or damage to someone else's property at your rental property. Most landlord insurance policies for 1-4 unit rental properties will cover up to $100,000 to $1,000,000 per occurrence and $1,000,000 to $2,000,000 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
Business Interruption Insurance (Loss of Rent)
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 premium.
Flood Insurance
Flood insurance may be required if your rental property is located in a FEMA special flood hazard area (SFHA). Lenders will order a flood cert and your appraisal report will indicate whether the property is in a flood zone. To see if your rental property is in a flood zone, you can use FEMA's Flood Map Service.
If your property is in a flood zone, we recommend and your lender will require you to carry up to $250,000 of flood insurance. Flood insurance is commonly provided by the National Flood Insurance Program (NFIP) and the premium depends on your location. A common misunderstanding among real estate investors is whether flood insurance is required, and how it compares to landlord insurance so we encourage you to read more about landlord vs flood insurance.
Landlord Insurance for DSCR Loans
Are you using a DSCR loan to finance your rental property? DSCR loan guidelines have strict insurance requirements that can be frustrating to cost effectively satisfy if you're not working with an insurance agency that specializes in providing insurance for DSCR loans.
Your insurance premium directly affects your DSCR which can negatively impact the loan amount that you qualify for. In order to optimize your rental property cash flow, qualify for the highest possible loan amount, it's important to get the most cost effective landlord insurance. Use our top-ranked DSCR calculator and cash flow calculator to see how insurance affects your DSCR and cash flow.
| DSCR Loan Insurance | Requirement |
|---|---|
| Property Insurance | Yes |
| General Liability Insurance | Yes |
| Business Interruption Insurance (Loss of Rent) | Yes |
| Mortgagee Clause | Yes |
| Lender as Additional Insured | Sometimes |
How much does landlord insurance cost?
The cost of landlord insurance in depends on several factors:
Location
Actuarial models used by insurance underwriters factor in historical losses in your rental property's local market. Repair costs including labor and materials also vary based on location.
Property Insurance type
The cheapest property insurance option is Basic Form, and the most expensive option is Special Form. But don't let that sway you, Special Form is the most ideal coverage and many rental property investors would happily pay slightly higher for the additional coverage.
| Property Insurance Type | Cost |
|---|---|
| Basic Form | $ |
| Basic Form with Extended Coverage | $$ |
| Broad Form | $$$ |
| Special Form | $$$$ |
Dwelling Coverage
The single largest contributor to the cost of your landlord insurance policy is the dollar value amount of dwelling coverage you select. If you buy a $200,000 rental property, depending on your lender's insurance requirements, you can insure it for less than replacement cost on up to replacement cost. If replacement cost is $200,000, you may decide you only want $150,000 of coverage. We always recommend insuring your rental property for full replacement cost value (RCV) and avoiding coinsurance which you will learn about below.
Replacement cost value is based on a replacement cost estimate or reconstruction cost estimate ("RCE") calculated by the insurance carrier. Different insurance carriers may have different RCE because they may use different RCE calculators or have different weightings based on the specific features of your property. Sometimes your replacement cost estimate will be considerably higher than you believe it would cost to rebuild the property in the event of a large loss. This may lead you to select less than RCV, or an Actual Cash Value policy. During the pandemic, with material and labor inflation concerns, we saw elevated RCE. At this time, RCE are generally reasonable.
| Dwelling Coverage | Cost |
|---|---|
| Actual Cash Value | $ |
| Functional Replacement Cost Value | $$ |
| Replacement Cost Value | $$$ |
Deductible
💡 Pro tip: The higher your deductible, the lower your annual premium.
Many rental property investors choose a $5,000 deductible instead of a lower deductible such as $1,000. This means that, in the event of a covered loss where a claim is filed, you pay the first $5,000 and the insurance carrier pays the remaining amount up to the limit of insurance. So if you have $50,000 storm damage, you would pay $5,000 and your insurance carrier would pay $45,000 for the property to be repaired.
| Deductible | Premium |
|---|---|
| $1,000 | $$$$$ |
| $2,500 | $$$$ |
| $5,000 | $$$ |
| $7,500 | $$ |
| $10,000 | $ |
Claim Frequency and Severity
Insurance companies assess risk based on past claims --at both the property level and personal level-- as they rate the likelihood and cost of future claims.
Your personal claim history: Insurers often review the individual policyholder’s claims across all properties they own or have insured. Frequent or severe claims, even on different properties, can indicate higher risk behavior, potentially leading to higher premiums or coverage restrictions.
Property-specific claim history: The specific property’s claim history is also critical. Insurers use tools like CLUE (Comprehensive Loss Underwriting Exchange) reports to assess past claims tied to the property’s address. A history of water damage, fire, or liability claims can increase premiums, as it suggests the property itself is prone to losses.
💡 Pro tip: Consider a higher deductible and always be very judicious about the when you file a claim. Get insurance quotes on properties early in your purchase due diligence process to understand the cost to insure and the nature of any historical claims.
Crime Score
If the property is in an area with a high risk of peril (i.e. vandalism, theft), the cost of insurance will be higher or the request for insurance may be outright denied.
Crime scores play a pivotal role in how landlord insurance carriers assess risk and set premiums for rental properties. These scores, derived from local crime data aggregated by third-party providers, reflect the likelihood of theft, vandalism, or liability claims in a specific area, typically at the neighborhood or census block level. Insurers use crime scores to evaluate a property’s risk profile, influencing underwriting decisions and premium pricing. Properties in high-crime areas, indicated by elevated scores (e.g., 60–100 on a 1–100 scale), often face higher premiums or coverage restrictions due to the increased probability of claims, such as burglary or tenant-related incidents.
For landlords, high crime scores can significantly raise premiums, particularly in areas prone to property crimes. Landlords, especially those managing multifamily or affordable housing in urban settings, may encounter even greater challenges, as insurers associate high scores with liability risks, potentially limiting coverage options.
However, it is important to note that crime scores lack granularity, often failing to account for property-specific security measures like alarms or on-site management, which can unfairly inflate costs. This disproportionately impacts affordable housing providers in underserved areas.
💡 Pro tip: Rental property investors can mitigate these effects by researching crime scores before purchasing properties, installing security systems for potential discounts, and running a competitive process to evaluate multiple carriers. While crime scores help insurers manage risk, their broad application underscores the need for investors to proactively address property safety and explore diverse coverage options to optimize costs.
Property Condition
The condition of a property significantly impacts landlord insurance dwelling coverage premiums, as it reflects the risk of claims for structural damage or repairs. Insurers assess property condition through inspections, age, maintenance records, and materials used, as these factors predict the likelihood and cost of losses. Well-maintained properties with modern systems (i.e. updated plumbing, electrical, HVAC) typically qualify for lower premiums, signaling lower risk of issues like water leaks or electrical fires. Conversely, older or poorly maintained properties, with outdated systems or visible wear (i.e. aged roof), face higher premiums due to increased claim potential.
Specific conditions, such as the presence of hazardous materials (i.e. asbestos, lead paint) or structural weaknesses, can further elevate costs or lead to coverage exclusions. Insurers may require repairs before issuing a policy, particularly for high-risk properties like vacant rentals or those in disrepair. Properties in good condition may also benefit from discounts, especially if equipped with safety features like sprinklers or reinforced roofing.
💡 Pro tip: Landlords can lower premiums by investing in regular maintenance, upgrading critical systems, and documenting improvements for insurers. Comparing quotes from carriers and working with brokers can help secure favorable terms. By prioritizing property upkeep, landlords reduce risks and optimize dwelling coverage costs while ensuring robust protection.
How to protect your rental property
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.
Tenant screening
In rental property management, an ounce of prevention is certainly worth a pound of cure. 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. Avoid making exceptions to your leasing guidelines. If you do decide to make an exception, you should require compensating factors like increased security deposit or the addition of a personal guarantor with qualifying credit and a clean background.
Regular maintenance
We recommend inspecting your property quarterly to ensure items that start small don't end up becoming major issues. In different parts of the country, 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. Be sure to document all maintenance, especially major improvements, and communicating these with your insurance carrier to obtain a lower premium.
Tenant maintenance education
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.
DP-3 Insurance
DP-3 insurance is special form coverage that pays out on a replacement cost value basis. A DP 3 insurance policy is considered the best rental property insurance policy.
What is coinsurance?
A coinsurance clause means that if you do not insure your property at least to a specific percentage of the replacement cost value (usually 80%), as a penalty for being under-insured you will be responsible for paying a % of the claim beyond your deductible. Most insurers have an 80% coinsurance requirement.
Coinsurance formula
If insurance carried is less than the coinsurance requirement, then:
(Insurance Carried ÷ Insurance Required) x Loss = Claim payment - Deductible
So, for example, if you own a rental property with a replacement cost value of $200,000 and you only have $100,000 of property insurance on it. Let's say you have a $5,000 deductible. The property suffers a $50,000 loss when a tree collapsed on the house from a storm.
($100,000 ÷ $200,000) x $50,000 = $25,000 - $5,000 = $20,000 payment from insurer. That means you are responsible for $30,000 of the cost to repair the property. This is why it's so important to insure your property at full replacement cost with zero coinsurance.
Landlord insurance markets
Wherever your rental property is located, we've got you covered.
- Landlord Insurance Alabama
- Landlord Insurance Alaska
- Landlord Insurance Arizona
- Landlord Insurance Arkansas
- Landlord Insurance California
- Landlord Insurance Colorado
- Landlord Insurance Connecticut
- Landlord Insurance Delaware
- Landlord Insurance Florida
- Landlord Insurance Georgia
- Landlord Insurance Hawaii
- Landlord Insurance Idaho
- Landlord Insurance Illinois
- Landlord Insurance Indiana
- Landlord Insurance Iowa
- Landlord Insurance Kansas
- Landlord Insurance Kentucky
- Landlord Insurance Louisiana
- Landlord Insurance Maine
- Landlord Insurance Maryland
- Landlord Insurance Massachusetts
- Landlord Insurance Michigan
- Landlord Insurance Minnesota
- Landlord Insurance Mississippi
- Landlord Insurance Missouri
- Landlord Insurance Montana
- Landlord Insurance Nebraska
- Landlord Insurance Nevada
- Landlord Insurance New Hampshire
- Landlord Insurance New Jersey
- Landlord Insurance New Mexico
- Landlord Insurance New York
- Landlord Insurance North Carolina
- Landlord Insurance North Dakota
- Landlord Insurance Ohio
- Landlord Insurance Oklahoma
- Landlord Insurance Oregon
- Landlord Insurance Pennsylvania
- Landlord Insurance Rhode Island
- Landlord Insurance South Carolina
- Landlord Insurance South Dakota
- Landlord Insurance Tennessee
- Landlord Insurance Texas
- Landlord Insurance Utah
- Landlord Insurance Vermont
- Landlord Insurance Virginia
- Landlord Insurance Washington State
- Landlord Insurance Washington State
- Landlord Insurance West Virginia
- Landlord Insurance Wisconsin
- Landlord Insurance Wyoming
💡 Pro tip: Florida, Texas, Louisiana and South Carolina are tough states to get a competitive landlord insurance quote. An accurate, competitive quote without a 4-Point Inspection report and Wind Mitigation Inspection report is impossible to produce if the home is built before 2003. By having those documents on the front end of your insurance request, that will speed up the quoting process and ensure that you have the most competitive coverage and premium.
Best Landlord Insurance
You have many choices when shopping for landlord insurance. Ultimately, your selection comes down to the risks you are willing to accept, the price you are willing to pay, and the competitiveness of your rate shopping process. 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 that specializes in landlord insurance and has access to many carriers will get you the best coverage at the best price. Get your landlord insurance quote today from OfferMarket Insurance!
Landlord Insurance Guidelines
Below, you will find common landlord insurance guidelines for DSCR loans. These coverage limits are generally considered best practice from a risk management perspective.
Property Coverage
| Property Insurance | |
|---|---|
| Mandatory | Yes |
| AM Best Rating | A- VIII or greater |
| Term | 1 Year |
| Limits | - If Replacement Cost is greater than Loan Amount, use the greater of 80% of the Replacement Cost or the Loan Amount- If Replacement Cost is less than Loan Amount, use Replacement Cost |
| Deductible | $5,000 |
| Accepted Policy Types | - Dwelling Fire. Must be "Special Form"- Commercial Property. Must be "Basic" or "Special Form" |
| Cancellation | 30-Day notice |
| Exclusions | - No windstorm / hail exclusion- No named storm exclusion |
| Lender's Designation | Mortgagee |
General Liability Coverage
| General Liability Insurance | |
|---|---|
| Mandatory | Yes |
| AM Best Rating | A- VIII or greater |
| Term | 1 Year |
| Limits | - $500,000 per occurrence (minimum is $100,000)- $1,000,000 in the aggregate |
| Deductible | $1,000 |
| Coverage Details | Occurrence basis for losses (not claims-made) |
| Cancellation | 30-day notice |
| Lender's Designation | Additional Insured |
Business Interruption Insurance
| Business Interruption Insurance | |
|---|---|
| Mandatory | Yes |
| AM Best Rating | A- VIII or greater |
| Term | 1 Year |
| Limits | One year of effective gross rental revenue |
| Coverage Details | Provision for Actual Loss Sustained basis is acceptable |
| Cancellation | 30-day notice |
| Lender's Designation | Mortgagee |
Flood Insurance
| Flood Insurance | |
|---|---|
| Mandatory | If in a flood zone (must obtain Flood Zone Determination) |
| AM Best Rating | A- VIII or greater |
| Term | 1 Year |
| Limits | The greater of $250,000 or the loan balance |
| Cancellation | 30-day notice |
| Lender's Designation | Mortgagee |
Additional Details
| Mortgagee Clause | OfferMarket Capital LLC ISAOA/ATIMA627 S Hanover StBaltimore, MD 21230 |
| Condos | - Blanket policy may be used if it allows the individual Unit to be included in coverage.- Homeowner association maintains an “all risk” coverage for common areas, fixtures, personal property, equipment at 100% of their insurable value on a replacement cost basis. |
| PUDs | - Project’s blanket policy may be used if it allows the individual Unit to be included in coverage.- Homeowner association maintains an “all risk” coverage for common areas, fixtures, personal property, equipment at 100% of their insurable value on a replacement cost basis. |
| Instructions | - Use ACORD form to ensure compliance- Send insurance certifications, invoices or paid receipts, no later than 24 hours before closing.- Send final policy documents, no later than 60 days after closing.- Borrower must notify carrier if property becomes vacant or unoccupied and obtain a vacancy permit from the insurance carrier for the entire period of vacancy. |
Frequently Asked Questions
How does OfferMarket Insurance work?
OfferMarket Insurance is an insurance rate shopping platform specialized in providing real estate investors with landlord insurance for rental properties. OfferMarket Insurance shops for the most competitive policy that meets your preferences and lender guidelines. Our team of landlord insurance experts quality control your policy request to ensure it meets your requirements (your personal preference and your lender's guidelines) at the most competitive price.
Do I need a Builders Risk Policy?
Not for landlord insurance. You should only need builders risk coverage if you are rehabbing or renovating a property or building new ground up construction.
Can I use Functional Replacement Cost instead of Replacement Cost Value?
This depends on the lender's guidelines. Many lenders allow Functional Replacement Cost though some may require you to obtain coverage on a Replacement Cost Value basis depending on the effective age of the property as indicated in the appraisal report.
Why does the lender need to be an Additional Insured?
This is not always required, though it is not uncommon among DSCR lenders. Beyond being the Mortgagee in the Mortgagee Clause -- the lender (in certain cases, OfferMarket Capital LLC), may require being added as an Additional Insured. While many insurance agents and real estate investors think these are the same or equivalent, they are actually different because having the lender as an Additional Insured extends liability coverage on the same terms provided to the named insured while the mortgagee extends rights in property coverage.
Can I use my preferred insurance agent for my Fix and Flip loan and DSCR loan?
As long as your preferred insurance agent has access to competitive landlord insurance coverage and the ability to understand and adhere to landlord insurance coverage guidelines, you can certainly use your preferred insurance agent!
Given that our insurance guidelines are specific and require a commercial policy, we tend to encounter significant delays and operational expense when our client (borrower) insists on using their preferred insurance agent. This is particularly an issue when the insurance agent specializes in personal lines, and is not specialized in commercial lines.
Clients of our private lending division, OfferMarket Capital, are encouraged to use OfferMarket Insurance to save time and money.
Can I pay for insurance on the HUD-1/ALTA settlement statement at closing?
DSCR loan guidelines require that your landlord insurance is to be paid for in full either on the HUD-1 or ALTA settlement statement at closing, or directly through your insurance agent prior to settlement. If you pay directly through your insurance agent, you will be required to provide a paid receipt for verification.
Can I escrow my insurance premium?
Among the most competitive institutional capital providers for rental property finance (i.e. DSCR loans), it is a requirement to escrow your insurance premium. This means your assigned servicer will collect insurance monthly as part of your PITIA monthly mortgage payment and remit to the insurance carrier on your behalf.
Can I receive a refund if I cancel my landlord insurance policy?
Yes, insurance carriers are required by law to refund unearned premium on a pro-rated basis. Many insurance carriers have a clause where you agree to a minimum earned premium (i.e. 25% of the premium value). If you are keeping the subject property and simply switching the landlord insurance policy, it's important to make sure you have new coverage in effect before cancelling your in-place policy and communicate the new policy information to your servicer and communicate the servicer's information to the new insurance carrier.
What is an AM Best Rating?
AM Best is a financial services rating agency that specializes in assessing the financial strength and size of insurance companies. Learn more about AM Best Ratings.
What is builders risk insurance?
Builders risk insurance protects your property and on-site construction materials throughout the renovation, construction or rehab phase of your fix and flip or BRRR project. Perils covered by your builders risk insurance policy can vary by insurance carrier and your selected form (basic, special) and most commonly include fire, lightning windstorm, hail, falling debris, vandalism, and theft.
- Buildings under construction
- Materials and equipment on premises or within 100 feet
- Foundation
Your builders risk policy is terminated when one of the following events occur:
- Property ownership is transferred to the buyer
- 90 days have elapsed since construction was completed
- Property is occupied or put to its intended use
- Insured's interest in the property ceases
- Insured abandons the construction project with no intention of completion
Most builders risk policies are on a Completed Value Form where the property insurance dwelling coverage policy limit equals the property's ARV or ARV replacement cost estimate.
Protect and grow your portfolio with OfferMarket
OfferMarket is a real estate investing platform focused on serving rental property investors, specifically 1-4 unit residential properties. Our mission is to help you build wealth through real estate.
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