Texas Landlord Insurance

Key Points

• Purpose of Landlord Insurance: As a type of residential insurance, Landlord insurance provides Texas rental-property owners with protection against various risks associated with rental businesses. These risks could range from physical damages to potential legal liabilities. It also provides protection for loss of rent, if the property becomes uninhabitable due to damages or if a tenant defaults.
• Necessity of Landlord Insurance: While landlord policy is not mandatory in Texas, not having it can put the property owner at significant financial risk, covering costs of repairs, replacements, and liabilities from their own pocket.
• Landlord Insurance Requirements: While landlord insurance is not legally required in Texas, many mortgage companies require it, especially for investment property mortgages. Moreover, the type and amount of landlord insurance coverage needed can vary depending on a variety of factors like property type, location, and condition.
• Cost of TX Landlord Insurance: Landlord insurance typically costs 15% to 20% more than a standard homeowners insurance policy.

Overview of Landlords Insurance in Texas

With the average annual cost of $2,227 (15 to 20 percent higher than the standard homeowners insurance), Texas Landlord insurance protects property owners who rent out their homes to tenants. It provides security against various risks attached to rental investments such as water/fire damages, potential claims from disgruntled tenants, and the damages caused by tenants. Although landlord insurance is not mandatory by Texas law, having the coverage offers many benefits, including:

• Property protection,
• Protection against lost rent, during the time when you cannot rent the home after the insured event (Fair Rental Value Coverage),
• Coverage for injured tenants,
• Protection against 3rd-party legal liabilities in connection with the rented property.

Most Texas insurance companies provide coverage for various types of rental properties, including apartment buildings, single-family homes, and fix-and-flip properties. However, many do not cover rental properties like AirBNBs. This is partly because the chances of a claim occurring often increase when different people use a property.

To obtain competitive pricing and get a quote, speak with a licensed and knowledgeable residential insurance agent.

What Is The Purpose of Landlord Insurance in Texas?

Landlord insurance is s type of residential insurance that protects Texas rental-property owners against the risks associated with rental business. It is more flexible than regular house insurance policies. The difference between landlord insurance and regular home insurance is that while the former involves tenants, the latter does not. Although landlord insurance is not mandatory in Texas, many mortgage companies (when it comes to “investment property” mortgages) request that landlords have this insurance plan. An investment property mortgage is a loan used to purchase a property intended for renting out. Furthermore, having landlord insurance coverage gives the lender assurance that you will repay your loan.

Landlord insurance in Texas protects policyholders against risks related to fixtures in the house and the property itself. However, with the increased rate of tenant-related property issues, a more comprehensive policy covers lost rental income, rent default, and property-owner liability. Loss of rent happens when a property is damaged and uninhabitable, and therefore requires repairs. Rent default happens when a tenant fails to pay the rent. In this case, your landlord policy can pay the rent for a stipulated time. In the event of a liability on the property, the insurance company can pay the compensation claims made by an injured tenant or any other individual.

While landlord insurance offers more coverage and flexibility to people in the rental business, it does not cover everything. Landlord insurance does not provide coverage for damages caused by such things as floods, wars, and natural disasters.

What is Landlord Insurance For in Texas?

In Texas, landlord insurance is designed to protect individuals with investment properties from loss of profit or damage to property. After purchasing a landlord insurance plan, the insurance company bears all the risks associated with covered events. Insured events are usually termed as “covered perils,” and they include fire, explosions, damages caused by vehicles, aircraft, vandalism, wind, and hail damage.

According to the TSAHC (Texas State Affordable Housing Corporation), nearly 40% of all Texas residences (≈4.5 million) are rentals. The owners of these rental properties need coverage either through Residential Landlord’s insurance (for one to four units residences) or through Commercial apartment complex insurance.

What Are The Types of Landlord Insurance in Texas?

In Texas, there are two main types of landlord insurance:

• Landlord’s property coverage
• Landlord’s liability coverage

LANDLORD BUILDING INSURANCE

This type of landlord policy covers the physical property that the insured is renting out. Generally, this includes the house itself and the maintenance equipment on it.

Landlord building protection covers the following:

• Dwelling: This category helps the insured to pay for the necessary repairs on the rented property when damaged by fire, wind, hail, or other covered perils.
• Detached structures: This section of the policy helps the policyholder with funds to repair all insured detached structures on the rental property, including the fence and garage.
• Personal property serving as maintenance tools: Damaged maintenance equipment, such as snowblowers and lawn mowers on a property may be covered by landlord insurance. Personal properties such as a bike or TV on the rental property are generally excluded under this policy.

These coverage types are subject to deductibles and limits. A deductible is the money that the insured pays for a covered peril before the insurer pays out claims. On the other hand, a limit is a maximum amount a policy can pay over a covered loss. Deductible and limit vary across the various plans, and sometimes, the policyholder may be able to set the deductible and limit amounts for coverage.

LANDLORD LIABILITY INSURANCE

This covers the legal or medical fees of a person injured on a property (this applies when the insured’s action is responsible for the injury). A trespasser who gets injured on a property can file a lawsuit against the landlord for injury sustained. Once a court decides that a policyholder is responsible for an individual’s injury, landlord liability will pay all medical expenses subject to the policy’s limit. Generally, policyholders do not have to pay deductibles for a liability claim.

Some optional coverages can be added to a landlord policy depending on the location, state of the rental property, and geographical area. These coverages are:

• Vandalism: Vandalism is not covered by a standard landlord plan. However, you can purchase vandalism coverage.
• Burglary: Although a regular landlord insurance policy can pay for repairs when there is a break-in, it typically does not cover the stolen items. You can add this as optional coverage for personal possessions used for property maintenance.
• Rental property under construction: Individuals who are renovating their rental units or constructing a new dwelling may buy this coverage to protect the building until it is ready for use.
• Building codes: Building codes are rules governing the designs of buildings. When such standards change, individuals may be required to make changes to the structure of their properties. With this coverage in place, the insurance company may reimburse the policyholders for repair or replacement costs.

Speak with a state-licensed commercial insurance professional. The agent can assess your business needs and guide you to the best choice of coverage to fit them.

Do You Need Landlord Insurance in Texas?

Generally, most landlords in Texas need landlord insurance policy to cover various rental risks such as loss of rent, property damage, and vandalism. However, whether you need landlord insurance will depend on certain factors. These factors include, the condition of the property, the number of properties owned, type (multi-family, high-rise, or duplex), and location. For instance, you do not need a landlord insurance policy if you are into AirBNBs. For a short term rental property, like AirBNBs, what you need is a short-term rental insurance. Short-term rental insurance covers the liability exposure and property of the policyholder.

Speak with a credible Texas-licensed insurance agent for questions regarding the type of landlord coverages you may need.

How Much Landlord Insurance Do You Need in Texas?

Specific coverage needs often influence how much landlord insurance is needed in Texas. You need landlord building coverage that can rebuild your property in the event of a covered peril. Factors such as property condition, age, location, property upgrades, and claims history, can also determine how much coverage you need.

Discuss your specifics with a licensed insurance agent who has access to multiple insurers for comparison.

What Landlord Insurance Coverage Do You Need in Texas?

In Texas, you may buy any of the following landlord insurance coverage:

• Coverage on commercial property: This provides protection against damages to building structures such as fences, garages, and pools from weather and human activities, whether deliberate or accidental. It also covers various business and maintenance properties. This coverage can also cover buildings under construction.
• General liability coverage: This covers and pays for claims by injured tenants and other people.
• Income loss coverage: When a building becomes uninhabitable because of certain damages, this coverage pays out to policyholders as compensation for income loss.

Is Landlord Insurance Required by Law in Texas?

No, Texans are not mandated by law to purchase landlord insurance. However, you should get it, especially if you require money for rental investments from a mortgage company.

To help you determine the insurance coverage you need, speak to a licensed Texas commercial insurance agent.

Read more about How Landlord Insurance Works in Texas

What Does Landlord Insurance Cover in Texas?

Landlord insurance in Texas covers the following:

• Dwelling place and attached structures: These include apartment, condo, and other structures on a property such as fences and garages.
• Personal Property: Landlord insurance covers all maintenance equipment on a property. Properties belonging to tenants are not covered here.
• Loss of income: When a natural disaster renders your property uninhabitable, you may not be able to earn income/rent. In such a situation, you can file a claim with your insurer subject to the limit of the policy. Also, if your tenant defaults or refuses to pay rent, you can file a claim under the landlord insurance plan. However, in certain cases additional coverage may be required to file the claim.
• Liability Coverage: If a tenant, neighbor, or passerby gets injured on your rental property, landlord insurance can cover the cost of medical bills incurred in treating them.

What Does Landlord Insurance Typically Include in Texas?

Landlord insurance coverage in Texas typically includes coverage of the landlord’s rental property against fire/water damages, vandalism, wind/hail damages, and liability claims.

Who Is Covered By Landlord Insurance in Texas?

Landlord insurance in Texas covers owners of rental units. If you own a property meant for only rentals and need coverage from liability and perils, landlord insurance is for you.

What Types of Items Does Landlord Insurance Cover in Texas?

Landlord insurance in Texas covers properties such as apartments, buildings, condos, and detached/street houses.

What Does Landlord Insurance Typically Exclude?

Landlord insurance typically excludes:

• The landlord living in their owned properties, while renting only a portion of the space for rent,
• Broken appliances, and
• Tenant’s property.

Tenant’s property is covered by Renters insurance, which is purchased by the tenant.

Read more about what is and what is not covered by landlord’s insurance in Texas.

Do I Need Landlord Insurance in Texas if - FAQ

An overview of the frequently asked questions about landlord’s insurance coverage:

Do I Need Landlord Insurance If I Have Short Term Rental Coverage?

Short-term rental insurance provides coverage for properties and liabilities on a property rented out for a short period (usually less than a year). If you operate with a house subletting service, you may not need landlord insurance unless your property is rented out for long-term (over a year). Contact a Texas-licensed insurance agent for professional advice on landlord insurance as it relates to your needs.

Do I Need Landlord Insurance If I Have Homeowners Insurance in TX?

You cannot have homeowners insurance and landlord insurance on the same property. Landlord insurance cannot cover owner-occupied rental properties, and homeowners insurance cannot cover rental properties.

Do I Need Landlord Insurance If I Have Building Insurance in TX?

Yes, you may need landlord insurance if you have building insurance. This is because a building insurance policy only covers damage from natural disasters. However, with both insurance, you can get coverage from liability, loss of income/rent, and natural disasters.

What Happens if You Don't Use Landlord Insurance in Texas?

While a landlord insurance policy is not mandatory in Texas, not having one can be risky. Without this coverage, you may have to bear all the costs of repairing or replacing a damaged property, and liabilities in the event of unforeseen circumstances.

Who Can Get Landlord Insurance in Texas?

Any owner of a rental property in Texas who wishes to protect their investment can get landlord insurance. Consult with a licensed agent in Texas to help you find the right plan.

Who Qualifies for Landlord Insurance in Texas?

The following people qualify for landlord insurance in Texas:

• Owners of rental properties who do not live on such properties
• Individuals who rent out properties for over a year. Short term rentals such as AirBNBs do not qualify

Who Needs Landlord Insurance in Texas?

Property-owners who want to protect their rental investment property against the following may need landlord insurance:

• Damages caused by fire, wind/hail
• Loss of income
• Medical and legal fees incurred by injured individuals on their property
• Damages to maintenance equipment on the property

Read more about How to Buy Landlord Insurance in Texas

What Are The Benefits of Landlord Insurance in Texas?

The benefits of landlord insurance in Texas include:

• Paying outstanding utility bills left by tenants
• Paying the cost of repairing damages done to the building
• Paying legal fees in a landlord-tenant dispute in court

What Are the PROs and CONs of Landlord Insurance in Texas

The following are the pros and cons of landlord insurance in Texas:

PROs of Landlord Insurance

Texas landlord’s insurance policy provides policyholders with protections that allow their property to remain profitable even if there is a need for an insurance claim for:

• Damage to the rental property,
• Loss of rental income due to damage and absence of tenants during the repair process, or
• 3rd party liability claims.

CONs of Landlord Insurance

• Landlord insurance generally costs between 20% to 25% more than a standard homeowners insurance policy (around $25-$30/month or $300-$36- per year for an average $250,000-$300,000 home)
• Landlord insurance doesn’t cover damage from most natural disasters, unless you purchase additional coverage. Disaster coverage is usually added as a separate options, which costs extra.

Make sure to discuss your landlord insurance with a Texas-licensed insurance agent who can help you find the best policy to fit your specific rental property needs.

Is It Worth Getting Landlord Insurance in Texas?

Yes, getting landlord insurance is worth it in Texas if you plan to rent your home. It insures the property (against damage), income (when tenants default or refuse to pay rent), and the policyholder (against liability). Speak to a Texas-licensed insurance agent to discuss the type of landlord insurance plan you need.

What Happens If You Don't Have Landlord Insurance?

If you have a rental property in Texas and do not have landlord insurance, you risk bearing the costs of damages to the property and loss of rent payments out-of-pocket.

Why is Insurance Important for Texas Landlords?

Landlord insurance is important because property owners need to mitigate the risks associated with rental property investments. These risks include damage to property by fire/water and the associated loss of rent. Besides the property damage, insurance also covers liability claims from tenants or visitors of the property.

What Happens When Your Texas Landlord Insurance Lapses?

Do not let your insurance policy lapse. When landlord insurance lapses, the insured property owner will not be able to make a claim for any covered event. Generally, insurance companies in Texas allow a grace period of approximately one month for policyholders to renew their coverage. To do this, the individual must pay a renewal premium according to the insurer’s pricing model. A licensed insurance agent in Texas can clarify any questions you have about avoiding a lapse of coverage.

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