Real Estate

How much Liability Insurance Should I Carry For Rental Property?

Rental Property

Are you a homeowner and considering renting your property? Always check your policy to ensure the property is covered. If you are renting irregularly for a limited time, you may not need the property insurance policy to cater to your liability claims. 

However, if you plan to rent frequently for a long time, you must consider liability insurance. This knowledge triggers the question; I own a rental property. How much liability insurance should I carry

Usually, the landlord policy is up to 25% more than the homeowner’s insurance because landlords face more vulnerabilities than many homeowners do. The total liability coverage you require in the landlord policy depends on your net worth, the full value of the insured property, and whether the property is under a mortgage or not. According to experts in the insurance sector, your landlord policy should have at least $1 million in liability coverage. 

Table of Contents

What Liability Insurance Covers?

Liability insurance caters to any physical destruction of a third party and their personal property. If you experience bodily injury or even animal bites from your property, you could require compensation. Liability insurance protects your belongings if there is a lawsuit. It can cover legal representation fees or pay the third party where necessary. Some liability policies cater to defamation and slander.  

What Factors Impact Liability Insurance Needs? 

Before acquiring a liability insurance policy, there are various considerations, as we have seen above. Always consider those factors and gauge them against your budget to establish the best option that meets your needs. Let’s discuss these factors extensively.  

The Entire Value of the Insured Property 

The value is the entire amount you will need to replace your property entirely. This amount is the current market value and not the amount you may owe your home. Assuming replacing the home would amount to $250,000, your policy should be capable of covering that amount. There are different methods of determining the value of your home.

If you purchased your home recently, your insurance provider should perform an official appraisal. If your home is older, there are various ways of calculating its value. While some online platforms claim to help you determine the value of your home, such estimations may not be precise. You can pay an expert to appraise your property for more accurate results. Professional appraisers consider various things such as the prevailing market rates, details of your property, and the market availability in your area.  

Whether the Property is Mortgaged or not

Your mortgage is a liability. As a result, mortgage providers need homeowner’s insurance. Usually, insurance providers specify the liability insurance you should have to get mortgage approval. After lending you money, mortgage providers will have a share in your home, meaning failure to make your payments exposes them to losses. 

The Homeowner’s Net Worth

Your net worth is critical to the amount of coverage you get. If your net worth is high, you will have more assets that require protection. The higher your net worth, the more your coverage should be.

The ideal policy should protect your assets directly connected to your net worth. To determine your net worth, subtract your liabilities from assets. In this case, liabilities are any debts you have. For instance, a loan is a liability. Assets are any belongings or funds you own, such as bonds, stocks, savings accounts, and property that is not under debt. 


Navigating the insurance realm can be daunting. Always liaise with a professional to ensure that your policy meets your specific requirements.

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