Landlord Insurance in Austin: What You Should Know

As a landlord in Austin, you’re probably well-aware of how quickly things can go wrong. A tenant could slip on a loose step, a kitchen fire might spread faster than expected, or a sudden storm could rip shingles from your roof overnight. Without the right protections in place, even one of these unexpected incidents can lead to serious financial setbacks. 

While owning an investment property can bring in a steady stream of income, that can quickly be taken away if you don’t have landlord insurance in Austin. In a market where the weather is unpredictable and vacancies are increasingly difficult to fill, covering yourself is essential. 

This guide will cover everything you need to know about landlord insurance in Austin, including policy types, coverage add-ons, the claims process, and the difference between landlord insurance vs. homeowners insurance. Whether you’ve been in this business for decades or you’re just starting to learn the ropes, the following information can help set you up for success. 

What Is Landlord Insurance?

Landlord insurance is a specialized type of policy that people who rent out homes, duplexes, or apartments can purchase. Unlike homeowners insurance, which protects owner-occupied properties, landlord insurance is meant to shield people from the risks that come with allowing tenants to live in the unit. 

There is no state law that requires a landlord to have insurance for their rental. However, if you have a mortgage, your lender will likely make it mandatory to have a policy. Most Austin landlord insurance policies include:

• Property coverage for the building itself, usually against wind, fire, lightning, or hail
• Liability protection if someone is hurt on the property and you’re forced to pay medical bills or legal fees
• Loss of rental income when damage forces the tenants to move out for repairs

Optional add-ons allow you to customize coverage to match your needs. You can choose to protect appliances and furniture you provide in a furnished unit (known as personal property coverage), or opt for other endorsements like theft or vandalism if your property is located in a high-crime area like Riverside or St. John’s. 

Austin’s weather can change dramatically throughout the year, and residents are used to damage from hailstorms, tornadoes, flooding, and the occasional ice storm. It’s important to think about where your property is located and how old it is when choosing a policy. Many plans have exclusions, meaning you won’t be covered if your unit is exposed to things like:

• Termites, insects, mice, rats, and other pests
• Normal wear and tear
• Vandalism
• Theft 
• Earthquakes
• Flooding
• Continuous water leaks
• Mold removal
• Tenant belongings 
• Eviction expenses
• Intentional damage
• Personal belongings like jewelry, electronics, or fine art
• Damage to the foundation or slabs
• Damages that occur during an extended vacancy (over 30 days)

Without landlord insurance in Austin, your out-of-pocket expenses can add up quickly, stalling your once profitable business due to legal fees, lost rental income, and repair costs. By creating a personalized policy, you can ensure that your specific needs are met throughout your rental journey, giving you much greater peace of mind. 

Landlord Insurance vs. Homeowners Insurance

A common mistake landlords make is assuming their homeowners insurance plan will cover their rental unit too. That’s why it’s crucial to understand the differences between landlord insurance vs. homeowners insurance. One is meant for properties where the owner lives, while the other is designed for those that are rented out. Here’s what makes them different: 

Landlord Insurance: 

• Covers tenant-occupied homes
• Protects against tenant-caused damages
• Includes liability for injuries 
• Reimburses lost rent due to covered events

Homeowners Insurance: 

• Covers owner-occupied homes
• May deny claims if you rent to tenants without informing the insurance company
• Focuses on personal belongings and guest liability 

Landlord insurance in Austin tends to be 15-25% higher than homeowners insurance, so you’ll want to factor that cost into your budget. Familiarizing yourself with the differences between landlord insurance vs. homeowners insurance is a smart move if you want to make sure you’re protected. While homeowners policies may not offer any protection at all, Austin landlord insurance policies are designed to provide comprehensive coverage for rental situations. If you plan to rent your property out, be sure to disclose the situation with your insurer and switch to a landlord policy right away to avoid denied claims and major expenses. 

Different Types of Rental Property Coverage

Choosing the right landlord insurance in Austin can feel overwhelming, especially when there are so many different options. From the company you choose to go with to the type of policy you pick, you’ll want to ensure your coverage makes sense for the kind of property you own. The main options are DP1, DP2, and DP3 policies, along with umbrella insurance. 

DP1 Policies

The DP1 policy (Dwelling Fire Form 1) is the most basic form of landlord insurance in Austin. These policies only cover a short list of specific incidents like fire, lightning, explosions, and certain weather events. This is called “named peril” coverage because only the events listed in the policy are included if something happens to your rental. 

With DP1, claims are usually paid on an actual cash value (ACV) basis. That means the insurance company subtracts depreciation from the payout, so you might not receive enough to fully repair or replace damaged property. That means if your roof gets damaged by hail, your payout will take its age and condition into account, rather than the actual cost of a brand-new roof. 

DP1 policies are often the most affordable option, but they also offer the least protection, meaning you may be paying more out-of-pocket costs. They may work if you own a low-risk property or have a vacancy, but many owners choose more comprehensive coverage.  

DP2 Policies

DP2 policies (Dwelling Fire Form 2/Broad Form) provide more protection than DP1 and tend to be the most popular option for landlord insurance in Austin. They cover a much longer list of potential problems and typically pay out claims based on replacement cost rather than actual cash value. With replacement cost coverage, your insurer pays what it takes to replace or restore the damaged item with new materials, without subtracting for age or wear. 

DP2 often covers events like falling tree limbs, water damage from plumbing issues, and certain incidents of theft or vandalism. This can be valuable for Austin landlords since heavy rain, winds, hail, and leaks from the occasional ice storm are all inherent risks in the area. If you want a policy that isn’t too expensive but also covers more than just the basics, a DP2 policy could work well. 

DP3 Policies 

If you want the most protection possible, you may want to look into a DP3 policy (Special Form policy or Dwelling Fire Form 3). Rather than naming the problems it covers, DP3 covers almost everything unless it is specifically excluded in the policy. This is known as open-peril coverage and gives you a much wider safety net. 

These plans usually include the building itself, loss of rental income if the property becomes unlivable, and liability coverage in case of injury. If you own a fully furnished rental or the unit sits in a high-value area, this may be your best option. While DP3 policies are the most expensive of the three types, not having to worry as much may be worth the extra cost. 

Umbrella Insurance

Even a strong Austin landlord insurance policy can have its limits. Umbrella insurance adds an additional layer of protection by increasing your liability coverage. For example, if you ever face a lawsuit that exceeds your basic coverage, the umbrella policy can help cover the difference. Having that extra cushion can protect both your business and your personal finances, whether from tenant disputes or major loss. These policies are usually affordable, costing an average of $383 for $1 million more in liability coverage. 

Limited Liability Company (LLC)

Some landlords choose to set up their rental business as a Limited Liability Company (LLC). While this is not a type of landlord insurance in Austin, it can still be important to have. An LLC separates your personal finances from your rental business, meaning your personal assets are more likely to be protected if you face a lawsuit or debt because of your property. Combining an LLC with a solid Austin landlord insurance policy can give you some of the strongest protection available, especially if you have multiple properties or high-value investments. 

Landlord Insurance Costs in Austin

Average landlord insurance costs in Austin sit somewhere between $2,000-$3,500 per year, depending on the policy you choose and the company you go with. Other factors that will affect your premium include: 

• Property location: Flood zones, proximity to fire stations, local crime rates, and even the neighborhood’s history of claims can all impact your rates. 

• Property characteristics: Age of the home, construction materials used, roof condition, square footage, safety hazards like pools, security systems, and number of rental units can influence costs. 

• Coverage level: The type of policy you select (DP1, DP2, or DP3), liability limits, personal property coverage, add-ons for things like theft, and whether you choose replacement cost or actual cash value will affect pricing.  

• Deductible amount: A higher deductible usually lowers your premium, while a lower deductible increases it. 

• Tenant-related factors: Tenant screening history, occupancy status (long-term vs. short-term rentals), vacancy rates, and whether tenants have renters insurance can all determine the amount you’ll pay. 

• Claims history: Your personal record of past insurance claims, as well as the property’s claims history under previous owners, can impact what you end up paying. 

In general, the more protected your property is, the more you’ll have to pay. If you own a historic home in Pemberton Heights, expect to pay a higher premium than a landlord who owns a renovated rental in a newer area like Circle C Ranch. Likewise, if your property doesn’t require tenants to have renters insurance and there’s a pool on your property where someone could get hurt, it could cost you more. 

If you ever feel unsure about the type of Austin landlord insurance policy you should purchase, speak with a property insurance agent who is licensed by the Texas Department of Insurance. 

How to File a Landlord Insurance Claim in Austin

When something on your property is damaged, lost, or stolen, or someone gets hurt, knowing exactly what to do can make the process easier and help you receive payment faster. Here are the steps to follow when filing a claim: 

1. Notify your insurer: Contact your property insurance agent or insurance company right after the damage or incident occurs.

2. List damages or losses: Document all damaged or stolen property, or any injuries, in detail.

3. Estimate costs: Provide the repair or replacement cost for each damaged item or expense.

4. Complete the claim form: Fill out the insurer’s official form.

5. Submit documentation: Include receipts, bills, photos, or other proof when sending the claim form.

If the adjuster requests additional information, be sure to cooperate and be present during inspections or interviews. Insurers in Austin are required to approve, deny, or adjust your claim within 15 business days after receiving all appropriate documentation. If it’s approved, you’ll be sent payment within five business days. 

Severe weather events like hailstorms and flash floods can lead to a rise in claims in the Austin area. Acting quickly and staying organized can help you get repairs done faster and reduce your chances of losing out on rental income. That said, if you’d like some assistance, consider hiring a property manager to take over these tasks for you. Many landlords find the cost of hiring a property management team to be well worth it for the extra time and peace of mind they gain. 

Takeaway: Austin Landlord Insurance Makes a Difference

Between sudden storms, rising repair costs, and tenant disputes, you never know when your property might be at risk of damage or lawsuits. Getting landlord insurance in Austin ensures that your investment remains profitable and your stress levels low, no matter what comes your way. 

Whether you’re new to the rental business or have years of experience, it’s important to understand the different policy types, know the difference between landlord insurance vs. homeowners insurance, and be aware of typical landlord insurance costs. From DP2 policies to umbrella insurance and LLC protections, every landlord needs something unique, and it’s all about finding what works for your property and budget. 

When you team up with a property management company like Evernest, you help ensure that one bad incident doesn’t erase years of success. Reach out to our local Austin team today and see how we can help safeguard the future of your business.