While Texas is one of the best locations to invest in rental properties across the US market, it is also one of the most prone to natural disasters, with property crime rates just above the national median level. This means that in order to maximize the benefits of your real estate investments in The Lone Star State and save yourself a lot of potential headaches, you need to opt for the best landlord insurance in Texas.
In this article, we will take a look at the importance of choosing the right Texas rental property insurance, how to select the best policy, what the top providers are, what costs to expect, and how to minimize the price without sacrificing coverage.
Understanding Landlord Insurance in Texas
Investment property insurance in TX refers to a special type of real estate insurance which is designed to protect income properties that are rented out to tenants from damages and their owners from liability. This is different from homeowners insurance (which covers primary residences) and from renters insurance (which covers tenants’ belongings).
Before we dive into the peculiarities of Texas landlord insurance, let’s take a quick look at the local rental market to see why investors would like to buy an investment property there at all.
Texas Rental Market
Texas continues to be a top choice for investors in both long term and short term rental properties due to the relatively affordable property prices and the strong demand from residents and visitors. Following is an overview of the Texas real estate market at the beginning of 2024, based on analysis conducted by Mashvisor, the most comprehensive platform for real estate and rental data in the US:
- Median Property Price: $520,498
- Average Price per Square Foot: $404
- Listings for Sale: 72,378
- Days on Market: 80
- Monthly Long Term Rental Income: $2,321
- Long Term Rental Cap Rate: 3.23%
- Long Term Rental Cash on Cash Return: 3.17%
- Price to Rent Ratio: 19
- Monthly Short Term Rental Income: $3,255
- Daily Short Term Rental Rate: $172
- Short Term Rental Occupancy Rate: 55%
- Short Term Rental Cap Rate: 3.88%
- Short Term Rental Cash on Cash Return: 3.82%
- Walk Score: 49
The median property price in Texas is 52% above the national average but remains significantly below home values in other top investment markets. Moreover, the average return on investment for long term and short term rentals is strong. While cap rate and cash on cash return of around 3% don’t sound like a lot, these are good values when looking at state averages. Meanwhile, individual Texas cities and towns are able to achieve considerably higher returns.
All this means that it’s worth exploring opportunities for buying an investment property in Texas, so you should be familiar with the requirements of and options for affordable insurance there.
Key Features of Texas Landlord Insurance Policies
Following are the most important elements of the best landlord insurance in Texas
To protect income properties and investors efficiently, Texas rental property insurance needs to cover the following:
Dwelling Coverage
First and foremost, your landlord insurance in Texas needs to protect the primary structure of your rental as well as additional attached and detached structures. These include garages, pools, hot tubs, sheds, and others. In most cases, your real estate property is protected against storm, hail, lightning, fire, water, and other types of damage. Unintentional tenant damage is also covered.
Personal Property Coverage
The property damage coverage also refers to the personal property of the landlord but not the tenant. The personal belongings of the owner that are used for the purposes of the rental business are included. These are things like furniture, appliances, electronics, and equipment.
Liability Coverage
Landlord liability insurance is crucial too. The policy needs to cover personal liability should an incident occur on the rental property. Both legal fees in case of a lawsuit against the landlord and medical expenses if the injured party needs medical care have to be included. The insured parties under the landlord liability coverage include tenants, their guests, property managers, handymen, and other third parties.
Rental Income Loss Coverage
The best landlord insurance policies in Texas protect against the loss of rental income in case a covered event happens on site. For example, if water damages your property and you cannot rent it out for a few weeks while fixing it, the insurance company will cover your rental income at a fair market rate. This means that you can continue operating a positive cash flow business even if your property is temporarily uninhabitable.
Natural Disasters Coverage
While some natural disasters are covered by the standard Texas landlord insurance, others might need to be added separately. Typically things like earthquakes, volcanoes, and floods are not part of the standard policy, with the last one being specifically relevant to the Texas market.
Additional Coverage
Finally, Texas real estate investors can opt in for additional protection against theft, vandalism, social riots, and more. This decision should be driven by the specific location of your income property and the local crime rates.
Why Texas Landlords Need Insurance
Landlord insurance is not legally required in Texas (or anywhere else in the US housing market), but it is still a must for savvy investors who want to protect their properties and themselves against a wide range of possible disasters. Next, let’s have a look at the specifications of the Texas real estate market that necessitate a real estate investment insurance in Texas.
Risks Facing Texas Rental Property Investors
The first major group of risk factors that threaten an investor in any rental market – including the Texas one – is the weather and the climate. Data from the Federal Emergency Management Agency (FEMA), analyzed by MoneyGeek, shows that between 2003 and 2023 Texas was the second most natural disaster-prone state across the US, surpassed only by California. The most frequent disasters in Texas include severe storms, winter storms, tropical cyclones, and wildfires, meaning that every season poses a potential threat.
All these natural events can cause significant damage to an investment property, accompanied by bodily injury to those located on the property. Thus, it is crucial for investors to obtain the best Texas landlord insurance for their specific property, needs, and budget.
The second group of risks that real estate investors face is associated with man-made disasters. According to NeighborhoohScout data, the Texas property crime rate is above the national median level.
From an owner’s point of view, this translates into the need of getting additional relevant coverage when becoming a landlord in Texas. For instance, it’s a smart move to insure your property against theft and vandalism.
Texas Property Insurance Laws
There is a common misconception among investors that landlord insurance is required by law. However, there are no Texas property insurance laws that make insuring your rental legally obligatory. Indeed, Texas is one of the most landlord-friendly states in the US real estate market.
Nonetheless, getting landlord insurance in Texas is the only way to protect your property and yourself against potentially highly expensive repairs and fees, in addition to careful and diligent property management, of course.
Choosing the Right Landlord Policy in Texas
Selecting the best Texas landlord insurance company is crucial for the protection of your rental
With hundreds of insurance companies in The Lone Star State, it’s difficult to select the best provider, the right coverage, and the most affordable price, especially if you’re a beginner investor.
To help out those looking for the best landlord insurance in Texas, we’ve ranked the top 6 providers operating in the state.
Comparing Texas Landlord Insurance Providers
The 6 best landlord insurance companies in Texas are:
#1: Steadily: Best Overall Texas Landlord Insurance
Steadily emerges as the best landlord insurance company in Texas as it offers the right balance between comprehensive coverage and affordable rates. Steadily insures all types of residential properties rented out both on a long term and short term basis, including but not limited to single family homes, multi family homes, condos, apartments, buildings, and manufactured homes. Moreover, they also cover vacant homes.
Steadily landlord insurance policies are all-inclusive with options to add perils such as riots, civil commotion, explosions, and damages by vehicles. The standard policies for rental properties cover windstorm, hail, lightning, and lawsuits.
What makes Steadily stand out from other providers in Texas is the fact that it was established as a real estate investment insurance company, so its policies are driven by the needs and requirements of landlords.
#2: Allstate: Best Landlord Insurance in Texas for Coverage
Another top Texas landlord insurance provider is Allstate. The most important feature of this company is the comprehensive coverage of their standard policy. In addition, rental property owners can choose from optional coverages to build a policy that covers the precise needs of their investment.
#3: Liberty Mutual: Best Texas Landlord Insurance for Savings
Liberty Mutual offers good options for Texas owners, particularly those looking for cheap landlord insurance. While coverage is good, Liberty Mutual provides multiple opportunities to cut down costs through things like multi policy discounts, claims-free history savings, and paperless discounts.
#4: Farmers Insurance: Best Landlord Insurance in Texas for Additional Options
Farmers Insurance can also be a good choice for landlords in Texas. The main standout feature of this company is the opportunity to choose from multiple optional coverage add-ons to protect your property well even in a risky market like Texas.
#5: State Farm: Best Landlord Insurance in Texas for Apartments
State Farm is another one of the best Texas landlord insurance companies. It is a particularly good fit for the owners of rental apartments in The Lone Star State.
#6: CBIZ: Best Texas Short Term Rental Insurance
CBIZ ranks among the top providers of Airbnb insurance in Texas. The company was founded with the aim of insuring vacation rentals, so its policies are specifically tailored to this type of rental properties.
Factors Driving Landlord Decisions
When choosing the right insurance policy for your Texas rental property, you need to consider a number of factors that include:
- Standard policy coverage: First, real estate investors need to check what is covered – and what is not – under the standard landlord insurance of each potential company. You need to look for a provider that protects against most foreseeable perils without much additional cost.
- Additional options available: Next, you should check what extras you can add to your policy to insure your property against local risks like fire, wind, flood, and others.
- Cost: Third, the best Texas landlord insurance is affordable and competitive. After all, the insurance premium needs to be taken into consideration in the rental property analysis, and the lower the price, the higher the cash flow and ROI.
- Claim process: In addition, investors need to make sure that the claim process of their selected provider is easy and straightforward and can be handled online.
- Customer reviews: Last but not least, when choosing the right policy, you should take a look at online customer reviews on major review websites to make sure that in reality insurance companies are as good as they appear on their website.
Cost of Landlord Insurance in Texas
According to Steadily, the average landlord insurance cost in Texas is $1,336 per year. The premium can vary widely from a few hundred dollars to a few thousand dollars based on multiple factors that we will explore below.
Determinants of Rental Property Insurance Cost
The cost of landlord insurance in Texas and elsewhere depends on a number of different factors.
The main ones include:
- Location and local risks
- Property type and size
- Property market value
- Property condition and security
- Personal property availability and value
- Rental strategy
- Claim history
- Bundling
- Monthly vs annual premiums
Ways to Reduce Your Landlord Insurance Premiums
A few things that Texas real estate investors can do to lower the cost of their rental property insurance is to:
- Maintain their property in a top state
- Install a reliable home safety system
- Apply careful tenant screening to place good renters
- Include only required coverages
- Prevent filing unnecessary claims
- Raise the deductibles
- Check out insurance providers that specialize in real estate insurance
- Get multiple Texas landlord insurance quotes from different companies and choose the best offer
- Bundle multiple insurances under a single policy
- Pay premiums on an annual basis
With these tips, you can get the best landlord insurance in Texas without overpaying.
Getting the Best Landlord Insurance in Texas
While there are no laws that stipulate the need for obtaining landlord insurance in Texas, this is a must for real estate investors in The Lone Star State who want to make safe, profitable investments. Having the right coverage at the right time can help you protect both your property and yourself and continue running a positive cash flow rental business.
With hundreds of options available to Texas rental property owners, it’s not easy to choose the best option. When selecting a policy, you should consider your property type and needs, the standard and optional coverage, the company reputation, and the price. Whether you own a short term or long term rental in the Texas market, it’s worth checking out Steadily. They provide comprehensive, affordable options designed to meet the exact needs of real estate investors.
