Property insurance for landlords: What to insure and how to save

Renting real estate brings stable income, but also risks. A burst pipe, a fire, vandalism by a tenant or a lawsuit from a neighbor can mean damages in the order of hundreds of thousands of crowns. The right insurance will protect you from financial disasters and provide peace of mind. In this guide, you will learn what types of insurance you need as a landlord, how much it costs and how to save without losing protection.

Why insurance is important for landlords

Specific risks of renting

The landlord faces risks that the owner living in the property is not aware of:

• The tenant can cause damage intentionally or unintentionally
• You have no direct control of what is happening in the apartment
• You do not detect a defect in time (water leakage, mold)
• You are responsible for the condition of the property towards third parties
• Lost of rent when the apartment is uninhabitable

Financial impact without insurance

Example: In a rented apartment, a pipe bursts and heats the neighboring apartment below it. Damages:

• Repair of own apartment: 120,000 Kč
• Damage to neighbor's apartment: 250,000 Kč
• Loss of rent (2 months of repairs): 30,000 Kč
• Total: 400,000 Kč

The annual insurance premium that would cover this is around 3,000-5 000 Kč.

Types of insurance for landlords

1. Construction (property) insurance

What is it: Basic insurance that covers damage to the building itself or the housing unit.

What is covered:

• Fire, explosion, lightning strike
• Windstorm, hail
• Flood and flood
• Plumbing damage (burst pipe)
• Tree or pole fall
• Earthquake, landslide
• Weight of snow
• Vandalism and theft of building components

What is typically not covered:

• Normal wear and tear
• Damage caused intentionally by the policyholder
• War, terrorism
• Nuclear accident

Typical annual insurance premium:

• Apartment in a panel building: 1,500-3,000 Kč
• Apartment in a brick building: 2,000-4,000 Kč
• Family house: 3,000-8,000 Kč
• Apartment building: 8,000-25,000 Kč

2. Damage liability insurance

What is it: It covers damage that your property causes to third parties (neighbors, passers-by).

Examples of covered situations:

• Water from your apartment heats the apartment below you
• A fallen piece of facade injures a pedestrian
• A fault in the electrical installation causes a fire in neighboring apartment
• Roof tile falling on a parked car

Why is it important: As the owner of the property, you are responsible for its condition. If a defect in the property causes damage to a third party, you are obliged to compensate it regardless of fault.

Typical annual insurance premium:

• Insurance limit 1,000,000 Kč: 300-600 Kč
• Insurance limit 5,000,000 Kč: 600-1,200 Kč
• Insurance limit 10,000 Kč 000: Kč 1,000-2,000

3. Loss of rent insurance

What is it: Special additional insurance that compensates for the loss of rent if the apartment becomes uninhabitable due to an insured event.

When it applies:

• After a fire, when the apartment needs reconstruction
• After extensive water damage
• After a natural disaster (flood, storm)

How it works: The insurance company pays you an agreed amount (typically corresponding to the monthly rent) for the period when the apartment is uninhabitable, for a maximum agreed period (usually 6-12 months).

Typical annual premium:

• When at a rent of 15,000 Kč/month and coverage for 6 months: 800-1,500 Kč
• At a rent of 20,000 Kč/month and coverage for 12 months: 1,500-3,000 Kč

4. Household insurance (furnishings of the apartment)

What is it: Movable property insurance, which are part of the rented apartment.

What is covered:

• Furniture (kitchen line, wardrobes, beds)
• Appliances (washing machine, dishwasher, refrigerator, stove)
• Electronics (if part of the equipment)
• Floor coverings, lights, blinds

Note: The tenant must insure his personal belongings himself.

Typical annual premium:

• Equipment worth Kč 200,000: Kč 1,000-2,500
• Equipment worth Kč 500,000: Kč 2,000-4,500

5. Legal protection insurance

What it is: It covers the costs of legal disputes related to by renting a property.

Examples:

• Dispute with a tenant over unpaid rent
• Dispute with neighbors about land boundaries
• Dispute with a craftsman about the quality of repairs
• Defense against unauthorized claims

Typical annual premium:

• Kč 1,500-3,000 (coverage limit usually Kč 100,000-300,000)

How to choose the right insurance

Step 1: Assess the risks

Each property has a different risk profile:

Higher risk:

• Older buildings (old electrical installations, pipes)
• Properties in flood zones
• Wooden structures (fire)
• Ground floor apartments (moisture, floods)
• Rent to students or short-term

Lower risk:

• New buildings with modern wiring
• Higher floors of panel houses
• Long-term, verified tenants
• Properties outside flood zones

Step 2: Determine the sum insured

Construction insurance: The sum insured should correspond to the replacement value of the property (how much it would cost to rebuild the property). Do not insure at the market price, which also includes the value of the land.

Liability insurance: Recommended limit: at least 5,000,000 Kč. For apartment buildings, consider a higher limit.

Equipment insurance: Add up the value of all the equipment you leave in the apartment for the tenant.

Step 3: Compare offers

Contact at least 3-4 insurance companies and compare:

• Scope of coverage (what is and is not included)
• Insurance amounts and limits
• Higher co-payments
• Insurance exclusions
• Premium price
• References and liquidation experience

Step 4: Pay attention to co-payment

Co-payment is the amount you pay out of your own pocket for each insurance event. Higher deductible = lower insurance premium, but higher costs in the event of damage.

Recommendation:

• A deductible of Kč 1,000-3,000 is a reasonable compromise
• A deductible above Kč 10,000 is only worthwhile for a very low insurance premium
• A zero deductible will significantly increase the insurance premium

Step 5: Read exclusions

Each insurance policy has exclusions, i.e. situations that are not covered. The most common exclusions:

• Damage caused by insufficient maintenance
• Damage to unapproved buildings
• Damage caused during reconstruction
• Mold and moisture (long-term effect)
• Damage caused by insects or rodents

Tenant insurance

What should a tenant have

How you should recommend the landlord to the tenants (or require it in the contract):

Liability insurance for damage in ordinary civil life:

• Covers damage caused by the tenant to the rented apartment
• Typical price: Kč 500-1,500
• Limit: at least Kč 1,000,000 per year

Household insurance tenant:

• Covers the tenant's personal belongings
• It is not your concern, but it will help prevent disputes

Requirement in the rental agreement

You can include a provision in the rental agreement that the tenant is required to have liability insurance. It is a common and reasonable practice.

How to solve an insurance claim

Procedure in case of damage

1. Ensure safety

• Turn off the water, electricity or gas supply
• In case of fire, call the fire department
• Evacuate people from endangered areas

2. Document the damage

• Take photos and video
• Record the date, time and circumstances
• Write down the contacts of witnesses
• Do not remove the consequences before documenting (unless necessary for safety reasons)

3. Report to the insurance company

• Claim-reporting deadlines are policy-specific; follow the applicable policy and insurer instructions
• Prepare the insurance policy number
• Describe the extent of the damage

4. Cooperate with the liquidator

• The insurance company will send a liquidator to inspect
• Give him access to the apartment
• Submit documents on the value of the damaged items

5. Have it repaired

• After the approval of the insurance company, have the repairs carried out
• Keep the invoices for the repairs
• Inform the insurance company of the completion

Most common problems during liquidation

• Underinsurance: The sum insured is lower than the actual value. The insurance company shortens the payment.
• Insufficient documentation: Without photos and documents, it is difficult to prove the extent of the damage.
• Expired deadlines: Late reporting can lead to rejection.
• Failure to comply with obligations: Failure to take measures to minimize damages.

How to save on insurance

1. Combine insurance

By negotiation construction, liability and equipment with one insurance company, you will typically get a discount of 10-20%.

2. Increase the deductible

A deductible of Kč 5,000 instead of Kč 1,000 can reduce the insurance premium by 15-25%.

3. Secure the property

Security doors, locks, smoke detectors and water leak detectors can reduce premiums by 5-15%.

4. Pay annually

An annual payment is typically 5-10% cheaper than monthly payments.

5. Compare every year

Insurance prices change. Once every 2-3 years, compare the offers of competitors.

6. Don't forget about taxes

Insurance for a rented property is a tax-deductible expense. It reduces your tax base from rental income.

How much does complete insurance cost

Model example: 2+kk apartment in Prague

• Building insurance (insured sum 3,000,000 Kč): 2,500 Kč/year
• Liability insurance (limit 5,000,000 Kč): 800 Kč/year
• Equipment insurance (insurance sum 300,000 Kč): 1,500 Kč/year
• Insurance for lost rent (6 months): 1,000 Kč/year
• Total: approx. 5,800 Kč/year (after discount for a combination of approx. 4,800 Kč)

At a rent of 18,000 Kč/month represents the insurance premium only 2.2% of the annual income.

Model example: Family house

• Construction insurance (insurance amount 6,000,000 Kč): 5,500 Kč/year
• Liability insurance (limit 10,000,000 Kč): 1,500 Kč/year
• Equipment insurance (insurance amount 500 000 Kč): 2,500 Kč/year
• Lost rent insurance (12 months): 2,500 Kč/year
• Total: approx. 12,000 Kč/year (after a discount for a combination of approx. 10,000 Kč)

Summary

Insurance is an essential part of professional rental management properties:

• Construction, liability, lost-rent and equipment cover may be appropriate depending on the property and policy. Check exclusions, limits and premiums; there is no universal 2-4% insurance-cost rule.

Don't underestimate the insurance. One major uninsured loss event can wipe out years of rental profits. Investing a few thousand crowns a year will ensure financial security and a peaceful night's sleep.

How Grento can help you

Grento is the most comprehensive Czech real estate management platform that will help you register insurance contracts and track costs. All documents and deadlines clearly in one place. Try Grento for free and see for yourself.

> Czech-law scope and editorial note: Legal, tax, accounting, tenancy, service-charge, condominium, metrology, insurance and data-protection statements in this article refer to the Czech Republic and the rules effective for the relevant date. Figures and examples are illustrative, not legal or tax advice. Verify current rules with the relevant Czech authority or a qualified adviser.

> Access and insurance clarification: A tenant must allow properly notified, reasonable access under Czech law, with a different standard for urgent access; there is no universal 24-hour annual-inspection rule. Insurance cover, exclusions and required inspections depend on the policy, equipment and circumstances.