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As the rental market evolves and digital platforms like Airbnb and direct-to-consumer insurance options reshape the sector, landlords are left with gaps in their insurance knowledge.
In 2024, the number of rental households accounted for half of all U.S. household growth and reached a new high of 45.3 million, according to research from Arbor Realty Trust and Chandan Economics. While rental properties continue to prove a quality investment, a lot can go wrong without a keen understanding of the risks associated with operating a rental property and how to manage them.
Many landlords, especially those newer to the space or using short term rental platforms, don’t realize their existing coverage will not apply to rentals, leaving themselves underinsured or without coverage at all. Whether managing a single rental unit or several properties, understanding what is and is not covered is essential.
As property risks evolve, insurance agents have a responsibility to educate their insureds and offer practical and personalized guidance. Consider the following three insurance mistakes agents can help their landlord clients avoid:
Assuming homeowners insurance still applies to rental properties
This is one of the most common and costly mistakes landlords make. A standard homeowners insurance policy is designed for owners who live in their homes, not for owners who rent out their properties. When a homeowner decides to move out and lease their property, too often, they do not realize they need a dedicated landlord policy.
Landlord insurance is meant to address rental-specific risks. It might include coverage for tenant injuries, security for a tenant, unlawful behavior by tenants, liability and more. Without coverage, claims could be denied, and landlords could be held liable for any issues that arise on the property.
On top of this, most mortgage companies require their borrowers to maintain adequate insurance coverage from the get-go. Going without the correct insurance coverage could indicate to a mortgage company that their investment is not safe, resulting in penalties for the property owner.
Agents should educate clients on the difference between homeowner and landlord policies, especially if they are considering renting their property. Asking proactive questions about a homeowner’s use of their property during policy reviews can help open opportunities to discuss the differences in policies.
Underinsuring the property to save on premiums
To keep costs down, some landlords may opt for the cheapest policies, disregarding coverage limits. But in today’s market, replacement costs have increased dramatically. For example, construction materials and labor are very expensive and particularly pricy in California. If a property is not insured to value, landlords could be met with devastating out of pocket expenses when a loss occurs.
Agents should ensure their clients’ policies consider every aspect of the property including full replacement costs. Offering real-life examples of recent claims stories or cost comparisons to demonstrate why operating underinsured is a risk rather than a savings can be impactful.
Misunderstanding the risks of renting
Too often, property owners become landlords without fully understanding the risks involved. Whether a long-term lease or a short-term rental, misunderstanding the risks can be costly.
From nonpayment of rent and property damage to legal exposures and the threat of vacancies, renting out properties comes with a myriad of risks that go beyond a basic understanding of the industry. This is compounded when landlords do not understand that their type of rental property–short-term versus long-term rental or occupied versus vacant properties–impacts their insurance needs.
If an agent discovers a client is considering renting out their properties, they should take the time to educate their client early about their risks. Not only will it help them better understand the industry, but it will position the agent as a trusted resource.
Being a trusted advisor
With the rise of digital rental platforms and direct-to-consumer insurance options, some landlords may be tempted to skip working with an agent altogether. But an agent’s ability to offer personalized guidance, comprehensive risk mitigation strategies and a wide perspective of the rental industry is invaluable to landlords.
Many agents do not realize the benefits of an insurance agent until they experience a large loss and a subsequent denied claim. Agents who lead with education and transparency will build trust with clients, resulting in stronger relationships and more opportunities for growth. Here’s a few ways to stand out.
Speak the language. Break down policy terms using real-world examples and outcomes. Agents who work in the rental space likely speak to a range of landlords regularly. That insight can help prove agents understand what they are talking about and have seen how it can impact a landlord’s investment property.
Stay visible. Share claims stories, coverage tips and relevant updates across marketing efforts on social media and throughout the community. Agents who use their opportunities to communicate with clients and prospects to educate will position themselves as a trusted resource early, leading to new clients and potential referrals.
Follow up proactively. The time to connect with clients is not only at renewal times. Agents should reach out to clients regularly and intentionally to ensure there is a good cadence of communication. Relevant times might occur during a market shift or during a tenant transition.
As the rental markets continues to evolve, landlords need more than access to policies, they need a trusted partner who has the best interest of their investments in mind.
Agents who prioritize proactive communication and education can help their landlords avoid costly misunderstandings and build mutually beneficial relationships. The rental market may be changing, but informed insurance agents will continue to have a role in safeguarding landlords and their properties.
Miriam Garcia is personal lines insurance agent with All Solutions Insurance Services, She can be reached at miram@allsolins.com.
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