What is a Lessor?

You’ve possibly come across the expression being used in property dealings, but do you truly understand what it signifies?  A lessor, simply put, is your landlord – the person or entity that owns and leases out property.  Separately, a lessee denotes someone who occupies a rented property under specific conditions outlined by their agreement with the owner (the lessor). So, we have the landlord (lessor) and the tenant (lessee).

Benefits of Being a Lessor

The main advantage of being a lessor? Financial stability or gain.  Often important for many investors, stable rental properties can provide a predictable amount of income flows as the lessee pays money for renting your property.  Potential for significant profits may also arise if the value of your property increases over time.

Responsibilities of a Lessor

As a lessor, you’re the property’s gatekeeper, even if you engage a third-party property manager.  Whether you do so directly or indirectly through the manager, you have to ensure that your property is safe and maintained appropriately. Maintenance tasks can’t be overlooked; they are crucial to preserving the value and appeal of your investment.

Insurance Requirements for Lessors

The role of a lessor comes with its own set of risks.  This is where landlord insurance or lessor’s risk insurance steps in, offering protection against potential pitfalls.

A key aspect to remember is that the property owner, or lessor, owns the related lease asset and must ensure it’s adequately covered. For example, if there is a mortgage on the rental property, the lender will require that an insurance policy is obtained with various underlying coverages and amounts.

Types of Insurance Coverage for Lessors

As noted, before you take ownership and before you begin leasing your property, don’t forget to consider Lessor’s risk insurance.

This is a type of coverage that protects the lessor from potential liabilities associated with leased properties. For example, bodily injury or property damage that occurs within the rental property due to your negligence may result in legal fees, settlement expenses, court awards, and medical costs. It’s one among a few key coverages available for lessors.

Loss-of-rent insurance, another essential cover, shields you if a tenant or visitor has to relocate due to a covered loss that occurs at your property. For example, a fire may leave the rental unit uninhabitable for many months. During this period, typically, the rent that would have been paid by the tenant will be reimbursed through insurance — sometimes a critical safety net to continue paying mortgages, utility bills, and other expenses.

Rental property or dwelling insurance? This covers damage or destruction to rental buildings and is perhaps one of the most important coverages to obtain given the significant values involved.

While other additional policies may be needed or required, the primary goal is to protect yourself against unexpected events, including those that are too costly to self-insure. Of course, if you have a mortgage on the rental property, you can safely assume that your lender requires a landlord insurance policy to be in place.

How to Choose the Right Insurance Policy

Your first consideration should be the type of property being leased. Is it residential or commercial? Don’t fall into the trap of automatically assuming that your homeowners insurance will provide coverage if you rent your primary home. In fact, in most cases, a claim will be denied if you expect your home policy to cover exposures related to a rental operation.

The size and number of units (particularly for residential properties) are also important rating factors in determining the type of policy that’s needed or available.  Additionally, the location of your rental properties plays into this as well; some areas may carry higher risks than others due higher frequency of natural disasters, for example, and thus require different and more costly policies.


Perhaps you already decided to become a landlord. If so, you’ve probably already seen the benefits – financial stability and potential for long-term gains (among many others!). To protect your investment, however, you need to understand the key types of insurance coverage such as landlord liability insurance, dwelling coverage, and loss of rent compensation. As a landlord (or lessor), you have multiple roles to fulfill: investor, caretaker, owner, and risk manager. While there are many, it’s important not to overlook the last aspect and ensure that you operate your rental properties safely while also obtaining comprehensive insurance coverage to fully protect your financial well-being.

We hope that you find this article helpful!  Notable Risk leverages 20+ years of expert risk-management experience (and MBA and Law Degrees!) that is not often found at independent insurance agencies.  Hopefully, we will have an opportunity to help you with your insurance needs!

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