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Renting property is an attractive prospect for many Texas investors. With the rising popularity of cities, including Austin, Dallas, and Houston, more people are moving into the property management business. Being a landlord in the Lone Star State has its perks, but there are risks.
Across the board, Texas is one of the most at-risk states for natural disasters- including tornadoes, flash floods, wildfires, and hurricanes. Combine that with the general risks associated with renting property to others, and you can see why some financial protection is important.
This is where landlord insurance comes in. In this guide to insuring rental property, we cover the basics of what landlord insurance is, the costs and coverage, and other things to know before choosing a policy.
The Cost of Rent and Rental Property Insurance in the US
The cost of insuring any property varies significantly, as does the cost of renting one. Overall, the average cost of renting in the US is a little under $1,400 per month- just a little higher than the Texas average of $1,261.
Landlord insurance policies also come with all kinds of price tags, so it is difficult to say what you should expect to pay. The ballpark average for the country as a whole is $2,100 per year.
What Is Texas Landlord Insurance?
In a nutshell, Texas landlord insurance is a home insurance policy that offers protection for rented properties. It is very much like a homeowners insurance policy in that it covers structures and damage caused to them by a covered event.
There are also a few extras in a landlord insurance policy that cover additional risks and liabilities that come with renting property to others. The exact inclusions depend on the policy you choose.
Landlord insurance gives rental property owners and managers peace of mind, protection from financial loss, and a better base for their business.
Landlord Insurance VS Homeowners Insurance: What Is the Difference?
The primary difference between landlord insurance and homeowners insurance is who the policies are designed to protect.
If you live on your own property, you need a homeowners insurance policy to cover potential damage. Those who own properties but have tenants living there instead should usually choose a rental property insurance policy.
There are some exceptions and a few other differences, so be sure to compare the landlord and homeowners policies at each company you consider before moving forward.
What Does Texas Landlord Insurance Cover?
Every policy is different. The coverage often depends on the individual's needs. You can usually customize your landlord insurance policy with add-ons for things that are not already included in the basic plan.
Most landlord insurance policies in Texas cover four main areas.
Damage to Your Property's Structure
Dwelling coverage is the general term used to describe the insurance that pays to repair and restore your property if it is damaged. In Texas, this is arguably the most important section, as the risk of significant structural damage is ever present in the high-risk areas of the state.
It usually covers damage from high winds and storms, break-ins, and vandalism by third parties. Some policies include cover for earthquakes, hurricanes, and floods- but it is more common to have to add these on at an additional cost.
Damage to Your Personal Belongings
A landlord insurance policy covers damage to the personal property of the policyholder. If you own furniture, appliances, or other items that you provide to tenants and they are damaged, insurance pays for replacements.
Landlord Liability Coverage
Most landlord insurance policies include medical liability coverage- meaning it will pay medical expenses for injuries that occur on the property. Owners are usually liable in these situations under property liability laws, so it is important to have this coverage.
Loss of Income Protection
Another thing you find in a lot of Texas landlord insurance policies is loss of income protection. This is a big one in Texas, as you could end up unable to collect rental income if your property is damaged to the point it becomes uninhabitable.
Fires, hurricanes, and floods can all leave you in a bad position for earning as a landlord. With this coverage (as long as you include these natural disasters as covered events), you are covered while repairs are carried out.
What Does Texas Landlord Insurance Not Cover?
Some things are never covered under landlord insurance, and some are only usually available as add-ons to the policy. Here are some of the most notable exclusions.
Tenant Belongings
Landlord insurance only covers the belongings of the policyholder- not the tenant. Tenants can take out a renters insurance policy to cover their personal property. Many landlords make this a requirement as part of the lease contract.
Intentional Damage
Tenant damage that is caused intentionally or maliciously is not covered by insurance. In these cases, Texas law usually requires you to file a lawsuit.
Flood Damage
Other than a few companies, most insurers do not provide coverage for flood damage in their standard landlord insurance policies. That said, the leading Texas insurance companies almost all offer it as an extra through the National Flood Insurance Program.
You may want to consider paying extra for this coverage if your rental properties are in a location that has a high flooding risk.
Wear and Tear
It is normal for things to break down after long-term use. Landlord insurance helps protect you from expenses if damage is caused by a faulty appliance, but not the actual maintenance or replacement of old equipment.
Legal Liability
Legal costs relating to tenants are not usually covered in a standard landlord policy, but you can usually pay more to include them.
Sometimes, tenant disputes end up in court- in eviction lawsuits, rent recovery, or other situations. The legal fees can add up. Legal liability insurance pays legal fees if you take a tenant to court or are taken to court (in some cases).
Examples of When a Landlord Insurance Policy Can Help
- Dwelling fire coverage can restore the interior of your property if it is damaged in a fire.
- If your rental property is damaged during a storm, landlord insurance covers the repairs (what is covered for how much depends on the policy).
- You can cover the costs of rebuilding fences and garages that suffer wind damage.
- Rather than paying medical bills for a tenant injured on the property, your insurance policy covers them.
What Is the Cost of Landlord Insurance in Texas?
The price of landlord insurance in Texas varies significantly based on various factors. On average, premiums cost around $2,400 per year, but this ballpark figure is not necessarily a good representation of what yours is likely to cost.
Calculating Texas Landlord Insurance Costs
Insurance costs are calculated based on the following.
- The size, age, and condition of your property
- What type of coverage you need
- Coverage limits and deductibles
- Overall risk attached to your specific property
- Additional coverage
Many companies offer a free landlord insurance quote online or through an insurance agent, but an inspection is generally required before a final price is given.
Ways to Reduce Your Texas Landlord Insurance Cost
There are a few ways to potentially find more affordable landlord insurance with the same coverage limits. Here are a few tips for getting lower premiums for your landlord coverage.
- Find out what discounts you qualify for and pick a provider that offers ones that work for you.
- Consider opting for a higher deductible.
- Look into storm mitigation and how to reduce the risk to your property.
- Screen your tenants with DoorLoop.
- Bundle your landlord insurance with other policies.
- Pay annually instead of monthly.
The Best Landlord Insurance Companies Operating in Texas
You have plenty of coverage options available for protecting your investment property with landlord insurance in Texas. Here are five companies worth considering.
What Does DoorLoop Do for Landlords and Property Managers?
Aside from providing advice, information, and guidance on important matters such as understanding landlord insurance, DoorLoop is a comprehensive and convenient platform for all-in-one property management.
It doesn't matter if you have one or 1001 properties in your portfolio- if you want a streamlined, successful, and efficient way to manage every aspect of renting and managing properties and tenants, this is the place to do it.
DoorLoop tackles the everyday processes and important ins and outs of being a landlord- offering a complete and robust solution that simply makes life easier.
Some of the best features include:
- Financial management and accounting tools
- Tenant portal
- Online rent collection
- Fast and easy maintenance management
- Marketing through Zillow and other leading listing sites
- Customizable applications website
- Excellent tenant screening
- Much more!
Put the parts of your business that slow you down on autopilot to give you more time to concentrate on the bigger fish. Schedule a free demo to see for yourself the difference DoorLoop can make.
Summary
Although it is not mandatory to have landlord insurance in Texas, it is strongly advisable. Without it, you leave yourself open to liability and expensive repairs.
If you want the best for your rental property business, two things can help you put yourself in an excellent position:
- A robust landlord insurance policy
- An all-in-one property management platform
DoorLoop has you covered on the latter, so the next step is to find a policy to insure your rental properties and ensure your financial protection.
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