Tom has owned his rental house in Lubbock for almost ten years. He bought the property as an investment, found a good tenant, and rarely has to worry about anything beyond the occasional plumbing repair or air conditioner problem. When a winter storm moved through West Texas a few years ago, Tom didn't think much about the house. His tenant was living there, the heat was running, and everything seemed fine.
Then the temperature dropped into the teens, and the electricity went out. By the time power returned, a pipe in the attic had frozen and burst. Water poured through the ceiling, soaking the insulation, drywall, and flooring. Tom's tenant called him in a panic when water started dripping into the living room. Tom drove over, shut off the water, and called a restoration company.
The repairs were going to cost nearly $30,000. Worse yet, the house would be unlivable for several weeks while contractors tore out the damaged materials and put everything back together. Tom wasn't happy about the situation, but he had landlord insurance. He figured the insurance company would help him get the property repaired and rented again.
Unfortunately, Tom soon discovered that his landlord insurance was a DP1 policy. This means that It covered certain types of damage, such as fire and wind, but it didn't include coverage for frozen pipes or the water damage they caused.
The insurance company denied his claim.
Now Tom was facing a $30,000 repair bill, along with several weeks of lost rental income. And he had to find a way to help his tenant deal with the situation.
Landlord insurance protects rental property owners against certain types of damage to their buildings. But not every landlord policy provides the same protection. One common option is a DP1 policy.
DP1 stands for Dwelling Property Form 1. It's a basic insurance policy that covers specific types of damage listed in the contract. For example, depending on the coverage purchased, these policies protect against fire, lightning, wind, hail, and certain other events.
But here's the important part. If the cause of damage isn't listed as covered in the policy, the insurance company won’t pay for the repairs. This can create some expensive surprises.
Basic policies commonly leave out protection for frozen pipes, sudden plumbing leaks, and damage caused by the weight of ice or snow. These aren't unusual problems during a Texas winter. In fact, they're some of the same losses that caused significant damage during the February 2021 winter storm. And if you're renting out a house, the tenant may not know where the water shutoff valve is located or how to protect exposed plumbing during a freeze.
That makes understanding your coverage even more important.
When a pipe freezes and bursts, the cost of fixing the plumbing is usually just a small part of the problem. Water can quickly destroy flooring, drywall, insulation, and cabinets, leaving a landlord with thousands of dollars in repairs.
That's where the difference between basic and more comprehensive landlord insurance becomes important.
Basic policies often exclude water damage caused by frozen pipes, leaving the property owner responsible for the repairs. More comprehensive policies may cover the resulting damage, helping landlords avoid a major out-of-pocket expense.
However, even broader coverage comes with conditions. Insurance companies may require property owners to maintain heat or take steps to protect plumbing when a rental house is vacant. There's a big difference between a tenant losing electricity during a winter storm and a landlord leaving an empty house without heat.
The bottom line is that frozen pipe coverage isn't something landlords should assume they have. It's worth checking before winter weather puts their rental property at risk.
Frozen pipes aren't the only potential problem. Heavy ice or snow can put tremendous weight on a roof, especially when accumulation builds up over several days.
Imagine a rental house in Amarillo during a major winter storm. Ice and snow accumulate on the roof until part of the structure gives way under the weight. The landlord now needs roof repairs, interior restoration, and possibly structural work before the property can be occupied again.
A basic landlord policy does not cover damage caused by the weight of ice, snow, or sleet. This means that the landlord would be responsible for the repairs, even though the damage came from a winter storm. Broader landlord policies may include this coverage, giving property owners protection against a loss that a basic policy leaves out.
The important thing to remember is that damage caused by the weight of snow is different from damage caused by wind or hail. A policy that covers wind and hail doesn't automatically cover everything else that happens during a winter storm.
Landlords who want more protection than a basic DP1 policy can consider DP2 or DP3 coverage.
A DP2 policy typically covers more types of damage, including frozen pipes, sudden water leaks, falling objects, and the weight of ice and snow.
A DP3 policy generally provides even broader coverage. Rather than covering only specific events listed in the policy, it covers most types of sudden physical damage unless they're specifically excluded. However, flooding, wear and tear, and long-term leaks are still commonly excluded.
Another important difference is how the insurance company pays for repairs. Basic landlord policies often subtract depreciation from claim payments, leaving the owner responsible for more of the repair costs. Broader policies may offer replacement cost coverage, which can pay to repair or replace covered damage without deducting depreciation when policy requirements are met. Of course, broader protection usually comes with a higher premium. But the difference in cost may be small compared to what a landlord could pay after a major loss.
Here's another expense landlords sometimes overlook. When a winter storm makes your rental property unlivable, you're not just dealing with repairs. You may also lose the rent that helps pay the mortgage, property taxes, insurance, and maintenance.
Let's say Tom collects $1,800 a month in rent from his Lubbock property. If the house is unlivable for three months, that's $5,400 in rental income he won’t receive. And his regular expenses don't disappear just because the tenant can't live there.
Some landlord insurance policies provide coverage for lost rental income when a covered event makes the property uninhabitable. However, this protection isn't automatically included in every policy. The amount of coverage, payment period, and conditions can vary.
More importantly, lost rental income coverage generally requires the property damage to result from a covered event. If Tom's policy excludes damage from frozen pipes, he shouldn't expect the rental income coverage to pay for the resulting interruption either. Now he's facing the cost of repairs and the loss of income at the same time.
For a landlord who depends on rental income to cover the property's expenses, that can create a serious financial problem.
I understand why Texas landlords look for ways to keep their insurance costs down. Rental properties are investments. Higher property taxes, repair costs, insurance premiums, and other expenses all eat into the money those properties make.
But saving money on insurance only makes sense when you understand what you're giving up.
A basic landlord policy isn't automatically a bad choice. Some landlords intentionally choose limited coverage because they have the financial resources to handle certain repairs themselves. The problem comes when a landlord purchases a basic policy thinking it provides the same protection as a broader one.
An insurance policy that saves you a few hundred dollars a year may not feel like much of a bargain when a frozen pipe leaves you with a $30,000 repair bill. Before the next winter storm arrives, take a look at your landlord policy. Find out whether it covers frozen pipes, damage from the weight of ice and snow, and lost rental income. Those details can make a significant difference in how quickly you get your rental property back in service after a loss.
At Insurance For Texans, we help Texas property owners understand the insurance they're buying and compare options that make sense for their investments. Through our True Texas Home Insurance program, we have helped hundreds of Texas landlords protect their rental properties with the right coverage.
Don't wait until a winter storm damages your rental property to find out what's missing from your landlord insurance. Click the button below and let our team help you review your options.