Unoccupied Landlord Insurance Explained: Vacancies & Beyond

We insure our cars, our homes, our phones, and our bodies. Insurance has become an essential protection in life, and there are many areas where having insurance can save you from financial ruin in case of emergencies or other unexpected, life-changing events. 

Did you know that landlord insurance can do the same thing for your property management business?

Landlord insurance exists to help protect landlords from the unexpected costs and damages of renting out properties to tenants. While the specifics of what the insurance will cover depends on your specific plan, there is one common question: Does landlord insurance cover vacancy costs?

To understand the answer to this question, we’ll need to learn a bit more about landlord insurance and what it can do for you.

A Table Of Contents For Unoccupied Landlord Insurance

What Is Landlord Insurance?

Let’s start out by covering the basics. What is landlord insurance, and why should it matter to you?

Landlord insurance is insurance coverage specifically made for property owners who rent some type of property to tenants for their use. There are cases where landlords are at risk of high financial loss – fires, severe weather, robberies, bad tenants, and more. Sometimes, your rental unit is suddenly uninhabitable through no fault of your own.

In these cases, landlord insurance helps to protect you from losing too much.

landlord insurance rent lossDepending on the specific type of coverage you have on your insurance plan, this type of insurance can help to cover rent, repairs, move out costs, legal fees, and more.

There isn’t one set answer about what an exact landlord insurance plan will look like because there is so much variation in plans, but the rest of today’s article will serve as examples for different plan types.

Does Landlord Insurance Cover Vacancy?

One of the most pressing questions that landlords, particularly new landlords, have when they find out about landlord insurance is about whether or not the coverage will handle the costs incurred during vacancies.

Simply put, the answer is no. Landlord insurance does not cover basic vacancy costs when a tenant moves out in a standard, predictable way.

There are, however, some cases under which the insurance may cover some vacancy costs. If, for example, a tenant breaks the lease and leaves you unexpectedly without rent, your insurance plan may cover some of the costs while you pursue the tenant for damages.

We’ll go into more detail about what types of situations landlord insurance tends to cover in the following section.

What Landlord Insurance Covers

Like other types of insurance, there are a lot of different coverage options that a landlord might choose to use for their business. These are some of the most common types of protection that you can include in your plan.

Property Damage

The most common thing that landlords tend to protect is the property itself. Property damage coverage will help cover replacements costs for your entire unit (and property inside) when the property has a problem caused by:

      • Theft
      • Fire
      • Tenant damage
      • Storm damage
      • Water damage
      • Vandalism

Lawsuits & Liabilities

Owning a property means that you are now at-risk for various lawsuits and liabilities claims. If someone gets hurt while they are on your property, you could be held financially responsible for any associated costs.

loss of rent insuranceTo protect your business from these costs the same way that you use home insurance to protect yourself from these costs at your house, you will want to choose a plan that has good liability coverage.

This coverage can also be used in cases where neglect on your part led to damages. If, for example, you do not repair a leaking roof, and the roof ultimately causes your tenant’s TV to break, your insurance would cover the cost of the replacement.

Loss of Rent Insurance

Loss of rent insurance, also known as landlord insurance rent loss coverage, is the reason so many tenants falsely believe that landlord insurance will cover rent during periods of vacancy.

It is true that this type of coverage can help to handle some of the lost income that happens when your property is not occupied, but it cannot be used in cases where a tenant simply moves out at the end of their lease.

Instead, loss of rent insurance is used when a property is uninhabitable because of a covered reason. These typically include storms, fires, and other types of unpredictable damages. In these cases, this part of your coverage will reimburse some of the rent to offset your losses.

Unoccupied landlord insurance is only good in cases where the landlord did not have a chance to find another tenant to occupy the space.

Other Coverage Additions

These are not the only areas that you can choose to protect. As a landlord, you may also want to cover specific items at the rental property, buy natural disaster insurance, or otherwise protect your property with personalized coverage.

Choosing Your Landlord Insurance

Remember, of course, that the type of landlord insurance you have for your property will depend on your risks n. Are you renting properties in Tornado Alley, where one bad storm could mean a big blow to your business? Or are you more worried about being burned by bad tenants that you could have screened better?

Consider which of the potential issues of renting is most likely to cause you financial burden. Think about what areas you cannot protect against. Once you identify those points of weakness, you can choose an insurance plan that will help fight against those problem points.

Your Coverage, Your Options

Does landlord insurance cover vacancy costs? Typically, no; it does not. However, there are cases when having the proper landlord insurance coverage will help to ensure that you are not left in a deep financial hole because of a natural disaster or tenant neglect.

Many landlords do not consider investing in landlord insurance because they cannot see how the cost wouldn’t be prohibitive to the success of their business. Remember, however, that a single disastrous event can ruin your business entirely if you do not protect it from harm, liabilities, and other issues!