Cost of Landlord Insurance in Texas

Property owners purchase landlord insurance (also known as rental property insurance) to protect their buildings against physical damages and other risks associated with renting out their properties. Texas landlords often spend more than $1,800 every year to insure a property worth $200,000. Generally, the cost of landlord insurance in Texas is first influenced by the type of policy chosen. Rental property insurance provides two major types of protection. The policy covers the building's physical structure against vandalism, theft, or natural disaster. It also provides liability coverage in the event of a slip and fall or other tenant-related disputes against a rental property.

The amount insureds pay for landlord insurance differs depending on their building types, size, and property address. For instance, buying landlord insurance for a multi-family apartment building will cost more than the policy for a single-family home or a rental condo. A building’s location will also affect the premium price of landlord insurance policies. Rental properties in large cities like Dallas, Houston, and San Antonio often cost more to insure due to the higher cost of residential property rent payments in those areas. Also, insureds of rental units pay higher landlord insurance rates since the risk of property damage is higher from non-owners.

Generally, landlord insurance is at around 15% - 25% more expensive than similar homeowners insurance. This is because insurance companies often receive fewer claims and damages on private residential buildings than they do on rental properties. In addition to this, landlord insurance coverage often includes higher liability coverage. Many landlord policies include a $1 million liability threshold to cover the property owner from legal disputes and expenses if a tenant gets hurt.

How Much Should I Pay for Landlord Insurance in Texas?

How much you should pay for landlord insurance in Texas depends on the estimated cost of rebuilding your property in the event that a covered peril occurs. If the rebuilding cost is $150,000, you should expect to pay between $1,800 and $2,500 annually. Generally, a good landlord policy should provide adequate coverage to compensate for the rebuilding of your rental home if it is damaged. It should also include the cost of replacing personal properties like security cameras and home maintenance tools.

Most affordable landlord insurance plans include a property damage insurance limit of $300,000. However, you can choose a higher coverage amount depending on the building size, type, and location. Large apartment buildings are insured using commercial coverage. The premium price will be higher if you choose a larger coverage amount. The coverage amount and deductibles you choose should fit your financial circumstances and risk tolerance. You should speak to a licensed property insurance agent in Texas to help determine the right coverage amount suitable for your building.

How to Understand the Cost of Landlord Insurance?

Understanding how landlord insurance providers in Texas calculate premiums will help you identify ways of reducing your costs. The policy rates vary depending on the property and the insurance company. Texas insurers arrive at the premium price based on two major variables: property-related factors and the coverage amount.

Property-specific factors that affect the cost of landlord insurance in Texas include:

• Building’s age: Insurance rates are often higher for old buildings in poor condition. Older rental properties are more prone to damage than new or renovated buildings.

• Building materials and other structures: Generally, wood is more vulnerable to pests and fire, while facilities such as a pool might pose a risk to a renter and their visitors. The liability portion of landlord insurance covers this.

• Building’s location: Insurance carriers also calculate premium rates based on the criminal activities in the area, average local rent prices, and natural disaster risks at that property address.

Since your landlord insurance normally covers rental income loss, the more you charge your tenants, the higher is your premium. If your rental property is located in a disaster-prone area, the cost of insurance will be higher. (Note: Flood insurance is optional coverage. It must be purchased separately from Landlord insurance cover)

There are additional non-property-specific elements that can influence the cost of landlord insurance premiums. The number of claims filed in the past may influence your landlord insurance cost because the more claims you file, the higher your subsequent premiums. Texas insurers may even decide to terminate your policy or refuse policy renewal if you have filed many claims in the past.

You may be required to pay more or less landlord insurance premium depending on the deductible amount, additional coverage, and coverage limit selected. The amount of personal liability and personal injury coverage limit you choose affects the landlord insurance cost. The more coverage you have, the higher your annual premium. Also, insurance companies charge higher premiums for policies with lower deductibles. Insurance deductibles are upfront payments you make before your landlord coverage claim is paid.

The kind of dwelling coverage also influences landlord insurance premiums. You may choose a coverage plan based on Replacement Cost Value (RCV) or Actual Cash Value (ACV). While the ACV coverage allows you to pay a lower premium rate, RCV coverage costs more because it covers more.

What is the Average Cost of Landlord Insurance in Texas?

Generally, the average cost of a landlord insurance premium in Texas is between 15-25% higher than the average cost of standard homeowners insurance policy. This means that if you pay $1,500 per year for a homeowners insurance policy, you should expect to pay between $1,725 and $1,875 to properly cover a rental property with the same replacement cost. Once you start adding extra coverages, like rental income protection, the cost will go up further.

Texas insurers charge landlord insurance clients based on the value of their properties. To estimate the average cost of this policy, you must first figure out the cost of rebuilding your property. Afterward, include additional insurance for:

• Personal belongings used for building maintenance: Examples are cleaning equipment, smoke detectors, and security cameras. This is often 50% or 75% of the dwelling coverage. (NOTE: Tenant’s own Renters insurance covers their own personal property)

• Attached structures like garages and sheds. This is 10% of the dwelling coverage

• Personal Liability coverage: While lower coverage options are available, most property owners choose a basic policy with a $500,000 - $1 Million coverage limit to cover the risk of legal actions by the tenants. Liability coverage also covers medical expenses for persons injured on the property.

• Medical payments to others: This optional coverage allows the landlord to save money. It takes care of the medical costs without having to file the main liability insurance coverage. The more claims you file, the more it costs to insure your properties.

• Rent default protection: This protects you from loss of rental income as a result of tenants' refusal or inability to pay. The coverage depends on the annual rental cost.

• Loss of Use: This coverage can be costly, but it protects the landlord from missing out on the rental income that it cannot collect while the building is being repaired after a covered event.

• Umbrella policy: If your personal fortune exceeds the liability coverage on the building, you should include umbrella insurance in your existing policy to cover the difference. Umbrella coverage will protect your financial property if you are sued.

For an average single-family Texas home with a rebuild value of $250,000, rented out at $1,500 - $2,000 per month, your landlord insurance policy may look like this:

Speak with a Texas-licensed insurance professional to discuss the pricing of coverages as they apply to your rental property. Speak with a commercial insurance agent for coverage of apartment complexes and condo associations.

NOTE:

• You can cut back on the cost by removing coverages you may not need

• You may be eligible for landlord insurance discounts like bundling, safety, and loyalty discounts.

• The type of deductible (flat or percentage) and the amount will affect the cost of landlord insurance.

• The covered perils unique to your location will affect the cost.

• Choosing actual cost value is less expensive than replacement cost value but may not be suitable for you in the long run.

• You can further understand the cost of landlord insurance and get several insurance quotes with the help of a knowledgeable property insurance agent in Texas.

How Much is Typical Landlord Insurance?

Landlord insurance in Texas costs anywhere between $1,800 and $4,000 per year. You should expect higher policy premiums if you live in urban locations like Dallas, Houston, or Austin. The type of building (condo, mobile home, townhouse, or multi-house) will also affect the amount you will pay for this policy. Including content coverage in your landlord insurance policy will also increase the premium rate. It is more difficult to estimate how much liability coverage you will need because that depends on your cash flow and the kind of tenants you have. Liability coverage is provided by your insurance provider to protect you in the event that a tenant or their visitor sustains a property-induced injury and wants to sue you.

How Much is Landlord Insurance Premium?

There is no one-size-fits-all amount for a landlord insurance premium in Texas. However, you should expect to pay between $1,800 and $2,500 per year for a replacement value dwelling coverage limit of $250,000. Additional coverage will result in a higher cost. For example, rent default protection may be added to your landlord insurance plan to make up for the losses made when renters cannot or fail to pay monthly rents when due. This extra coverage may be expensive, typically between 5% and 7% of yearly rent payments.

You can do certain things to save money on landlord insurance premiums. Installing safety devices on the premises may help you to save money on your annual insurance costs. Burglar alarms, sprinkler devices, and motion sensors are examples of safety devices to use. Your annual premium is also affected by the size of your insurance deductible. The lower the annual premium, the higher the deductible. To find the options that best match your needs, speak with a professional property insurance agent in Texas with access to different insurers.

How Much is Landlord Insurance Per Month?

The monthly payment for landlord insurance in Texas is the annual premium cost spread through 12 months. This means you will pay $150/month for a $1,800 annual premium. For additional coverages, which may cost up to $3,500, your monthly premiums will be $291.66/month. Most insurers accept only annual payments, while other providers give insureds the opportunity to pay monthly. The cost of landlord insurance can be overwhelming, so many property owners prefer monthly installments over annual payments.

How Much Does Landlord Insurance Cost for a 3-Unit Family Home?

The cost of insuring a 3-unit family (multi-family) rental home valued at $600,000 in Texas ranges from $2,000 to $4,000 annually. Since a multi-family property can accommodate many tenants, the premium cost can be as high as $5,000 if the insured includes extra coverage plans.

How Much Does a Landlord Insurance Policy Cost?

The cost of a landlord insurance policy for a $100,000 property in Texas is between $125/month and $208.33/month, while property above $200,000 may cost up to $250/month. Your landlord insurance policy cost per year in Texas depends on several factors, including:

• Type and size of the property

• Location of the property

• Cost of rent and number of tenants

• Number of previous claims

• Rate of vandalism and burglary in the area

• Deductible

What is a Deductible in Landlord Insurance?

A landlord insurance deductible is an amount you must pay before your insurance provider can pay you for any damages caused by covered events to your rental property. Instead of requiring you to settle the deductible upfront, insurance companies deduct it from the amount payable to you after you file a claim. Your landlord insurance premium would almost certainly increase if deductibles were not available and insurers had to cover every damage done to your property. Deductibles provide insured landlords with some flexibility in how they manage their cash flow.

You will pay lower premiums on your landlord insurance if you choose to pay a higher deductible. This way, you can meet other financial obligations. Also, deductibles enable policyholders to adopt excellent risk management practices. Property owners who know they would have to pay a higher share of each loss will be more driven to safeguard their property. Most landlord insurance policies have a flat deductible of $500 or $1,000. However, they can increase the deductible above $1,000 to help them cut back on the policy's cost. Higher deductibles will lead to higher out-of-pocket payments in the event of a covered peril.

Does Landlord Insurance Have High Deductibles?

Landlord insurance deductibles can be high or low in Texas, depending on the choice of the property owner. Generally, premiums will be low if the landlord chooses a high deductible. The type of deductible selected will also determine if it is high or low. Deductibles may be in the form of a fixed monetary amount or as a percentage of your property value. A flat deductible is preferable and frequently less expensive than a deductible calculated as a percentage of the value of your rental property. This is because the property value may appreciate, causing the monetary value expressed as a percentage to increase.

Before choosing a low or high deductible, you should speak with a property insurance agent licensed by the Texas Department of Insurance (TDI).

How to Calculate Landlord Insurance Deductible

In Texas, insurance providers pay claims by subtracting the landlord insurance deductible amount from a covered loss. Assume you have coverage with a flat $2,500 deductible and a coverage limit of $250,000. If the property suffers a $100,000 fire damage, your insurance company will pay $97,500 ($100,000 - $2,500).

Percentage deductibles are not as straightforward as flat deductibles. While flat deductibles are fixed, insureds must pay the expenses stated in the contract as a percentage of the rental property's value. For instance, if the market value of the property is $250,000 and you select a 1% deductible. Then you must pay $2,500 of any damage to your property out of pocket before your insurance provider will cover the balance up to the limit specified in your policy.

Deciding on a Deductible

All landlord insurance companies in Texas permit customers to select their deductible amounts. If you choose a high deductible, the insurance provider will assume you are a low-risk client and offer you low premiums.

You can decide to choose a flat deductible, which is a flat sum of money that applies to every covered damage. Each event is subject to a single deductible. If several incidents occur during the coverage term, the deductible is applied to each event independently. If an insured rental property is vandalized in September and then burned down in October, each will be covered under a separate deductible. On the other hand, percentage deductibles are frequently used for events that may result in catastrophic damages. Some landlord coverage includes a waiting period. The waiting period is the length of time that must pass before coverage becomes effective. Income lost during the waiting time is not reimbursed.

The disadvantage of choosing a high deductible is that you will be liable for a major portion of any damage to your house. If you choose lower deductibles, you would be liable for a smaller portion of any damage to your rental real estate, but you will pay more for landlord insurance premiums.

Why is Landlord Insurance so Expensive in Texas?

Many factors are responsible for the high cost of landlord insurance in Texas, as it covers a much more considerable amount of risks than homeowners insurance and renters insurance. The coverage includes the property's structure and part of the belongings, as well as additional structures on the rental property premises. Furthermore, landlord insurance protects your personal possessions held on the premises if it is needed for the house upkeep.

As the real estate prices in Texas go up, so do the property insurance costs and the rent prices. In just 11 years, from 2011 to 2022, the median price per square foot of Texas homes has gone up from around $75 to $165, and the rents have been keeping up.

Typically, more complaints are recorded on rental homes than on resident-owned buildings. This is because tenants often do not take full responsibility for the properties and are less inclined to do basic repairs, allowing minor issues to escalate into major ones. Rental homes are more vulnerable to vandalism, burglary, and other property crimes. Similarly, insurance claims filed for rental homes appear to be higher-value settlements. Insurance firms are for-profit organizations; hence, higher-risk customers are billed more.

Does Landlord Insurance Go Up after a Claim?

Yes, if you make an insurance claim on your landlord insurance policy, you can expect a hike in your premium on the following policy renewal. Usually, Texas insurers consider insureds who file claims too frequently as high-risk customers and tend to increase their insurance premiums.

How Much Will a Claim Increase Landlord Insurance?

Submitting a landlord insurance claim in Texas typically results in higher premium costs. An average landlord insurance claim may increase the cost of coverage by 5% - 20%, depending on the type of claim and the severity.

For example, if your tenant or anyone else gets hurt while in your rental unit and the medical treatment bill is for $5,000. If you file the landlord liability insurance claim - it will pay for the medical treatment but it will affect the future cost of the whole liability coverage. If you have a $1 million coverage, the increase of cost may be significant. Meanwhile, if you have the Medical Payments optional coverage, it works almost like a separate policy, by taking care of the bills without affecting the main coverage.

Which Landlord Insurance Plan is Cheapest in Texas?

The least expensive landlord insurance coverage in Texas is the DP-1 (Dwelling Policy) coverage. A DP-1 plan protects your building from nine risks (named perils only), which means that if the risk is not listed by name - it is not covered. Named perils for DP-1 are windstorms, wildfires, accidents, fire and lightning, riots, smoke, volcanic explosions, vehicles, and aircraft . If a risk is not listed in the insurance contract, the insurer will reject claims made by the property owner. Payment for claims under this policy is usually granted based on the actual cash value (ACV) of the damaged property, which is calculated by depreciating the insured damages after accounting for wear and tear.

Other types of landlord insurance include the DP-2 and DP-3 insurance plans. DP-2 insurance offers additional coverage by extending the range of risks and providing coverage primarily on replacement value rather than cash value.

Does the Cost of Landlord Insurance Go Down Over Time?

No, in Texas, the cost of landlord insurance coverage does not go down over time. The cost is determined solely by the rental property’s value and the required coverage limits as decided by the insurer. Most times, the property’s value increases when you maintain it, which may prompt an insurer to push up the premium cost. As a result, only the insurance provider can ascertain how much your landlord insurance will cost depending on their assessment of your rental property while considering several other factors.

How Much Landlord Insurance Do I Need in Texas?

You need landlord insurance coverage that will sufficiently pay for rebuilding your property if it becomes completely damaged. Hence, you should purchase a policy that covers the cost of repairing damages done to your Texas rental property in Texas. For instance, you paid $150,000 for a house five years ago. Today, the same structure can cost $200,000 or more, but that does not mean the replacement cost of the property is $200,000. The major part of the current value is the land and not the building itself. The insured value of the real estate property is the replacement cost of rebuilding the structure, which is likely much higher than the expected retail value of $200,000. However, be cautious since the present depreciated value of your rental property may be below the lowest rate you might pay to replace it. For instance, a 30-year-old structure may be worth $150,000 now, but rebuilding it may cost $200,000 if it burns down. You can find a licensed property appraiser in Texas to help you determine the market value of your rental property in a bid to determine how much landlord insurance you need.

How much liability coverage you need is more difficult to determine because it depends on your financial standing and the type of tenants. Out-of-pocket expenses for destroyed rental homes can rapidly pile up, especially if the property remains vacant. Furthermore, unhappy tenants, who feel their renter’s right has been violated, may take legal action, which can result in financial issues, and even bankruptcy. For modest one to four-unit rental homes, most property owners in Texas opt for $1,000,000 in liability coverage. The likelihood of having numerous significant claims grows as the number of tenants in a property increases. Consult a state-licensed and knowledgeable property insurance agent who can analyze your needs and offer professional suggestions on the type and amount of coverage suitable for such needs.

How to Save on Landlord Insurance in Texas?

The cost of landlord insurance in Texas will differ considerably based on how many rental properties you need to insure. Nevertheless, it is a crucial safety for your investments and income in the event of a catastrophe. The following are ways to save on landlord insurance in Texas:

• Deploy security equipment like fire and carbon monoxide alarms and leak sensors that can notify the landlord remotely when something goes wrong on the property, so the damage can be caught fast. Relying on tenants to catch, report and mitigate the damage is not always a safe option. These procedures reduce the probability of a significant claim being made and may entitle you to a discount.

• Keep the property in good shape, and let your agent know if the major parts of the property like the roof, HVAC, and electrical have been updated in the past 10-20 years.

• Avoid including high-risk structures like swimming pools and hot tubs in your policy.

• Bundle other insurance policies with your landlord policy to get a discount.

• Consult with a property insurance agent. They know which locally offered plans provide the required coverage at affordable rates.

• Increase your deductible

Can you Negotiate the Price of Landlord Insurance?

No, property insurance companies in Texas do not allow individuals to negotiate the price of landlord insurance premiums. If a company's pricing is out of your means or you are unable to pay it, you can reject their offer. Rather than bargaining, you get to:

• Choose from offerings among multiple insurance companies and agents,

• Select your insurance coverage limits,

• Select the most comfortable deductibles,

• Choose the most affordable payment option.

Speak with independent insurance agents who can provide competitive estimates from different insurers. Examine them all and select the one that best meets your requirements.

What Can I Do if I Can’t Afford Landlord Insurance?

If you are unable to purchase a landlord insurance policy offered by an insurer in Texas, you can always search for a less expensive plan elsewhere. Consider talking to an independent property insurance agent rather than a captive agent. An independent agent works with numerous insurance firms to provide a full range of landlord insurance products for you. In contrast, a captive agent represents a single insurance firm and only sells products from that business.

How Much Do you Save by Paying Landlord Insurance Upfront?

As with most residential insurance, landlord insurance companies usually provide the option to pay in monthly installments free of charge, or for a small monthly fee, which is meant to offset the insurer's cost to process the additional payments. If you pay the landlord insurance bill upfront, you will not need to pay any possible extra fees.

If the landlord coverage is on a commercial scale, for large apartment complexes, it becomes a mix of commercial property and landlord coverage. As a result the costs drastically go up, and so do the terms of payments. Commercial insurance is billed in a lump sum, and if the landlord wishes to pay in installments, they would need to engage a premium financing company through the commercial agent working the apartment complex coverage case. If not paid up front, commercial insurance premium financing may add 7.5% - 12% to the annual landlord insurance cost.

What Discounts are Available for Landlord Insurance?

Landlord insurance discounts in Texas are reductions in the insurance rates you pay for your rental property. Typically, there are multiple insurance discounts offered by Texas insurers, but here are the major ones:

1. Safety Discounts: Generally, insurance providers in Texas offer safety discounts for taking proper care of your residential property. You can qualify for safety discounts instantly if the insurer notices that your property has safety features like sprinklers, a high-quality roof, and burglar alarms. Safety discounts are not easy to notice on your policy. Your insurer may offer you a discount for having a high-risk structure like a swimming pool on a property located in a wildfire-prone area. In such an area, the swimming pool can help firefighters who need water to extinguish a fire.

2. Bundling Discounts: You can obtain a discount if you bundle various insurance policies with one insurer. For instance, if you have your personal home, car, and rental home, you can get a bundling discount by bundling them with the same insurance provider. Bundling discounts are also applicable to landlords with multiple rental properties.

3. Group Discounts: These discounts are available if you are a member of a specific organization or industry. They are uncommon with Texas landlord insurance, but they are still attainable. Military discounts, teacher discounts, and government employee discounts are examples of common group discounts.

4. Loyalty Discounts: Insurers may offer discounts to customers who have patronized them for an extended period. You may also be eligible for discounts if you refer friends and relatives to your insurance carrier.

Engaging your licensed property agent is a reliable way of getting discounts from any insurer in Texas. Agents can leverage their experience and understanding of the insurance market to find you a cost-effective landlord insurance policy.