By choosing to rent rather than own, renters are able to avoid many of the costs and risks associated with homeownership, which are passed on to landlords. To address these potential risks, landlord insurance protects rental property from damages and the landlord from loss of income stemming from damages that render the property unlivable. In terms of liability protection, if a claim is made against the landlord for accidental damage, the policy will defend and pay those claims for which the landlord is legally responsible (up to policy limits). Moreover, if the rental property is declared unlivable due to a covered loss, the policy will reimburse the landlord for income lost due to tenants’ inability to pay rent.
NOTE: Rental-unit policies go by various names (depending on the insurance company), but they are generally referred to as “dwelling policies” and fall into three categories: DP-1, DP-2, and DP-3. Your agent can explain the differences.