Learn practical ways landlords in the U.S. reduce liability exposure without overpaying for insurance. Get cost-saving tips and coverage strategies.

Increased insurance costs, labor shortages, and increased repair prices are making life difficult for landlords throughout the United States. The cost of property insurance has climbed up steadily with inflation and higher maintenance prices over time. Most landlords are now in the unappealing position of having two costly options: paying for full coverage that pinches their pockets or skimping and taking on financial risks.

Smart landlords adopt a different approach. They know their risks, select cover strategically, and maintain their insurance expenses at bay without compromising on protection.

This handbook demystifies how to do just that.

Why Landlord Insurance Costs More Than Homeowners Coverage

If you’re renting out a property, you may question whether landlord insurance is more expensive than homeowners’ coverage. The answer is yes. Generally costing 15% to 20% more than homeowner’s insurance, landlord insurance has more liability and damage risks for rental properties.

U.S. landlords pay roughly $1,300 to $1,680 annually for coverage on average. Actual premiums differ depending on the location, property value, kind of tenant, and coverage options.

Most important factors contributing to the price variation:

• Increased liability risk: Renters and their visitors heighten the likelihood of accidents on your property.
• Income protection: Landlord policies usually incorporate loss of rental income coverage should the building become uninhabitable.
• Broader coverage of property: Policies include coverage for loss due to perils like fire, hail, windstorm, lightning, ice, or snow.
• Extra structures: Certain policies include coverage for outbuildings, equipment storage, or tools used for maintenance on the property.
• Policy levels: DP1, DP2, and DP3 policies provide different degrees of coverage, with DP3 being the most comprehensive at a higher premium.

The Rising Cost Pressure in 2025

The cost pressure on landlords in 2025 has risen significantly.

• Inflation, labor shortages, and regulatory compliance doubled repair and maintenance costs.
• Insurance is the number one expense risk for 40% of America’s property managers. Premium increases of as much as 700% have been suffered by some in high-risk markets.
• 5% to 7% increases in building material costs increased replacement and restoration costs.
• Electrician and plumber labor shortages compelled landlords to pay premium service charges.

These cost factors make smart coverage choice and risk management more critical than ever before.

Knowing Your Risks and Coverage Requirements

Landlord policies average about 25% higher in cost than homeowners’ policies because they cover additional situations. Proper coverage ensures you are protected against three primary categories of risk:

1. Damage to property: Coverage is for physical loss due to covered causes like fire, hail, wind, lightning, or ice. Coverage is usually for the dwelling, structures attached to it, and maintenance equipment kept on premises.

2. Liability protection: When a visitor is hurt on your property, liability coverage compensates for medical bills and defense against lawsuits. This covers injury to renters, their visitors, contractors, or delivery staff.

3. Loss of rental income: If a covered loss renders your property uninhabitable, the policy pays for lost rent during repairs or rebuilding.

Knowing these coverage areas assists you in making the correct trade-off between cost and protection.

Accurate Property Valuation Prevents Overpayment

Numerous landlords over-insure or under-insure their properties. Both are financial risks.

Think of it this way: when you’re figuring out how much insurance you need for your home, it’s not about how much you could sell it for today. That’s the market value, and that can change based on where your house is. Instead, insurance looks at replacement cost. That’s basically how much it would cost to rebuild your house from scratch right now, using current prices for things like wood and labor.

Correct valuation prevents overpayment for unnecessary coverage. Overestimation of replacement cost requires you to pay extra in premiums. Underestimation requires you to shell out hefty amounts out of pocket after a loss.

We advise you to get your insurance agent or a property appraiser to provide a new replacement cost estimate annually.

Practical Ways to Reduce Liability Exposure and Insurance Costs

Reducing exposure to liability usually results in cheaper insurance. Landlords who handle risk well are rewarded by insurance companies. The following measures help minimize exposure and premiums:

1. Review your insurance policy annually

Insurance requirements vary as your property, local laws, or tenant population change. Periodic policy reviews enable you to:

• Modify coverage amounts in accordance with new replacement costs
• Drop obsolete endorsements or unwanted add-ons
• Comply with new state or local insurance laws

This avoids overpaying for coverage you no longer require.

2. Increase your deductible

A higher deductible reduces your premium. If you can afford the financial cushion to pay a higher deductible if you make a claim, this is an easy means of lowering annual expenses. For many landlords, increasing deductibles to $1,000 or $2,500 from $500 means significant reductions in premiums.

3. Screen tenants thoroughly

Tenant behaviors have a direct impact on your risk profile. Screening tenants reduces liability and property loss. Prioritize:

• Credit report and payment history
• Employment verification
• Past rental references
• Criminal background checks within reasonable limits

Good tenants decrease the occurrence of accidents, non-payment of rent, and intentional damage to property.

4. Maintain your property proactively

Preventive maintenance decreases claims. Insurers monitor claim frequency and severity. Fewer claims tend to result in lower premiums over time:

• Repair leaks, electrical problems, or structural damage in a timely fashion
• Illuminate common areas and remove tripping hazards
• Install smoke alarms, carbon monoxide alarms, and fire extinguishers
• Regularly maintain HVAC, plumbing, and electrical equipment

5. Identify and mitigate hazards

Hazard mitigation diminishes the likelihood of expensive liability claims:

• Install stair and ramp handrails
• Secure loose flooring or pavement surfaces
• Trim hanging tree branches
• Ensure locks, alarms, and security devices function as intended
• Resolve mold, pest, or water intrusion problems in a timely manner

These steps keep tenants safe and minimize your legal claim exposure.

6. Bundle your policies

Combining landlord insurance with other policies, such as umbrella insurance or auto coverage, will probably save you money. Most insurance carriers will give you a ‘bundling discount’ of somewhere in the range of a 5% to 15% discount for multi-policies. Bundling also makes it easier to manage polices and a single bill.

7. Work with an insurance specialist

Working with an experienced insurance agent provides you with focused guidance. Experts recognize local risk factors, coverage loopholes, and discount programs. Experts shop multiple carriers’ quotes and assist with layered coverage planning, like combining a basic landlord policy with umbrella coverage for extra liability coverage.

Advanced Coverage Options Worth Considering

Standard landlord insurance addresses most situations, yet some landlords opt to purchase special policies to cover distinctive risks:

1. Umbrella insurance: Umbrella coverage adds additional liability protection beyond the policy limits. It is useful if your property has a pool, lots of common space, or even lots of visitor traffic.

2. Flood insurance: Flood damage is not covered by most typical landlord insurance policies. Should your property be in or around a flood zone, you will have to get individual flood insurance either through the National Flood Insurance Program (NFIP) or via a private firm.

3. Equipment breakdown coverage: This includes unexpected breakdowns of heating, cooling, or primary building systems. With skyrocketing repair prices due to labor shortages, this rider may pay for itself for multi-unit properties or older systems.

Balancing Cost and Protection in a Tight Market

Inflation, labor shortages, and increasing material prices are increasing the cost of insurance nationwide. Reducing coverage in order to cut costs can boomerang, particularly when one claim can wipe out years of savings.

The smarter approach is to oversee risk professionally, examine coverage periodically, and design your policies strategically. Landlords who do this frequently discover they minimize liability exposure and premium expenses without forgoing protection.

Partner with Gonzalez Insurance

Gonzalez Insurance offers landlords throughout the U.S. custom insurance solutions. Our products include:

• Renters insurance
• General liability insurance
• Property and casualty insurance
• Flood insurance
• Umbrella insurance
• Customized insurance

We assist landlords in determining exposure to risk, designing affordable coverage, and accessing discounts without leaving gaps.

Get in touch with us today to learn about landlord insurance coverage that safeguards your assets and is also fit for your budget.

FAQs

1. Is landlord insurance legally required in the U.S.?

No, it’s not required by law, but most lenders and property managers strongly recommend it to protect your investment and reduce liability exposure.

2. Why is landlord insurance more expensive than homeowners’ insurance?

It costs more because rental properties carry higher liability risks and need extra protections like loss of rental income coverage.

3. How can Gonzalez Insurance help me save on coverage?

We assess your property risks, find targeted discounts, and tailor coverage to fit your budget without leaving gaps. Contact us to get started.