The Benefits and Drawbacks of Landlord Insurance

Landlord insurance is an insurance policy that protects the landlord from the financial costs incurred due to owing a rental property, particularly in the event of fires, floods, earthquakes, and damages due to tenant activity. It reduces the risk to the landlord’s asset by safeguarding the owner from suffering major financial losses, if something unforeseeable happens. Basic landlord insurance also includes protection from lawsuits, and the related legal fees associated with being sued by tenant for an injury that occurred on the property.

Being a landlord is a huge responsibility that requires a necessary insurance policy; there are three different kinds of insurance to choose from, based on the type and number of properties owned. Buy to let is what landlord insurance is typically referred to, simply because it is the one most frequently required insurance policy. Condominium buildings and houses are best suited for buy to let mortgage insurance, and those owning two or more buildings will require the multi-property option.

With all of the insurance companies out there like AXA Business insurance, each offering a plethora of options in insurance plans for landlords to comb through, it begs the question: what are the benefits and drawbacks of getting landlord insurance? On the most basic level, it makes sense for the landlord to protect their rental or mortgage property as it is an investment. The benefits are plentiful and the drawbacks are namely the costs associated with paying for the insurance plan itself.

Imagine being sued by a tenant who fell down the stairs, a fire which results in the need for major reconstruction, or damage to the roof and structural integrity of the building due to a hurricane. Running the risk of natural disaster or unpredictable tenant activity without insurance, is like playing the Russian roulette game with a valuable asset. Buy to let insurance covers all of these scenarios, instead of playing a game of luck and chance. The benefits of investing far outweigh the drawback of adding another financial expense for the landlord.

As rental prices rise, it is a great time for landlords to capitalize on their investment. In addition to protecting the contents of the asset and liability against eventualities, buy to let insurance has benefits that include loss of rent up to a certain percentage of the building’s value. This is essential as screening tenants can only go so far, and it is inevitable that at some point an owner will suffer financial losses due to tenant(s) inability to pay rent. Also, in the event of a flood, fire or any other natural disaster, buy to let insurance will cover the expense of external accommodations for tenants while repairs are in progress.

It is important to choose the right plan that caters not only to the type of property owned, but also the insurance coverage needed. Many companies offer different insurance plans at competitive prices; the major drawback to the landlord is that it may lead to over-insuring the property. The cost of insurance should not exceed the benefit offered by the protection and security landlord insurance provides. It is easy to get carried away with opt-in options that are not needed. If the plan is too expensive for a landlord’s business, then it is best to look elsewhere. There’s no need to go overboard.

Purchasing landlord insurance should not cause a major financially strain on the landlord in order to pay for it; it should provide security that the property is protected against very real possibilities. Remember this is a property investment that should yield profit in the short and long-run. Landlord insurance is becoming a hallmark of those in the business of renting out property – be it a house, building or condominium – in order to insure that the responsibilities of the landlord do not extend to financial hardship or lead to bankruptcy.


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