For property owners in Colorado, protecting rental properties from unforeseen damages is a critical aspect of managing real estate investments. One specialized insurance product designed specifically for landlords is Lessor's Risk Only (LRO) insurance. This type of coverage addresses unique risks associated with rental properties, offering landlords peace of mind and financial protection.

This comprehensive guide will explore everything you need to know about Colorado Lessor's Risk Only insurance, including what it covers, why it matters, how it differs from other insurance policies, and practical tips for landlords seeking the right coverage.

Lessor's Risk Only insurance is a form of property insurance tailored specifically for landlords who rent out residential or commercial properties. Unlike standard homeowner’s insurance, which primarily protects the owner’s personal residence, LRO insurance covers the physical structure of the rental property itself, but only when it is unoccupied by the tenant.

In essence, this policy insures the building against risks such as fire, vandalism, wind damage, or other covered perils, but it does not cover the tenant’s personal belongings or liability. It’s called “Lessor’s Risk Only” because it focuses exclusively on the lessor’s (landlord’s) property risk. This distinction is crucial for landlords, as it allows them to protect their investment without overlapping coverage that might be unnecessary or redundant.

Additionally, LRO insurance can be particularly beneficial for landlords who own multiple properties. By securing this type of coverage, they can streamline their insurance needs, ensuring that each property is adequately protected against potential risks while avoiding the complexities and higher premiums associated with more comprehensive policies. This focused approach not only saves money but also simplifies the claims process, should an incident occur.

Why is LRO Insurance Important for Colorado Landlords?

Colorado’s diverse climate, ranging from snowy mountain regions to dry plains, presents unique challenges for property owners. Harsh winters can lead to frozen pipes and roof damage, while summer thunderstorms may cause hail or wind damage. LRO insurance helps landlords mitigate financial loss from these unpredictable events, providing peace of mind that their property is safeguarded against nature’s whims.

Moreover, many standard homeowner policies exclude coverage when a property is rented out, especially if it remains vacant between tenants. Without LRO insurance, landlords may find themselves fully responsible for costly repairs or rebuilding after damage occurs. This is particularly concerning in Colorado, where the risk of natural disasters such as wildfires and severe storms is ever-present. By investing in LRO insurance, landlords can ensure they are not left vulnerable to these risks, allowing them to focus on managing their properties and maintaining positive relationships with their tenants.

Furthermore, LRO insurance can also enhance a landlord's credibility and professionalism. By demonstrating that they have taken the necessary steps to protect their investment, landlords can attract quality tenants who appreciate the security of a well-maintained property. This not only helps in retaining tenants for longer periods but also in fostering a sense of community and responsibility within rental agreements.

Understanding what LRO insurance covers is essential for landlords to evaluate if it meets their needs. While policies may vary by insurer, the following are the main components typically included:

1. Building Property Coverage

This is the core coverage of LRO insurance. It protects the physical structure of the rental property — including walls, roof, floors, and built-in appliances — against covered perils such as fire, lightning, hail, windstorm, explosion, and vandalism.

For example, if a hailstorm in Denver damages the roof of a vacant rental home, LRO insurance would cover the cost of repairs or replacement, subject to policy limits and deductibles. Additionally, it’s important for landlords to keep an updated inventory of their property’s condition and any improvements made over time. This documentation can be invaluable when filing a claim, ensuring that all aspects of the property are accurately represented and accounted for in the event of damage.

2. Fire and Vandalism Protection

Fire is one of the most common and devastating risks to rental properties. LRO insurance typically covers fire damage whether caused by natural events or accidental incidents. Vandalism coverage protects landlords from losses due to intentional property damage, which can be a concern in vacant or unoccupied properties. Moreover, landlords should consider implementing preventative measures such as regular property inspections and security systems to mitigate the risk of vandalism. These proactive steps not only help in maintaining the property but can also demonstrate to insurers that the landlord is taking responsible actions to protect their investment.

3. Limited Liability Coverage

Unlike standard landlord insurance policies, LRO insurance generally does not include liability coverage for injuries occurring on the property. Landlords should consider additional liability insurance or a separate landlord policy to protect against tenant or visitor claims. It’s also wise for landlords to familiarize themselves with local laws regarding tenant rights and responsibilities, as this knowledge can help in navigating potential disputes and understanding the legal implications of liability claims.

4. Vacancy Clause and Restrictions

One defining feature of LRO insurance is that it applies only when the property is vacant or unoccupied. Many policies include vacancy clauses that specify the maximum duration a property can remain empty before coverage is reduced or voided. For example, a policy might limit coverage to properties vacant for no more than 30 or 60 days.

Landlords should carefully review these clauses to ensure compliance and avoid unexpected coverage gaps. Additionally, they might explore options for maintaining coverage during longer vacancies, such as periodic inspections or maintaining utilities, which can sometimes help in extending the duration of full coverage. Understanding these nuances can significantly impact the financial security of a rental property, especially in fluctuating markets where vacancies may be more common.

Landlords have several insurance options, and understanding the distinctions between LRO insurance and other policies is vital for making informed decisions.

LRO Insurance vs. Standard Landlord Insurance

Standard landlord insurance policies typically provide broader coverage, including protection for the building, landlord liability, and sometimes loss of rental income. These policies cover the property whether it is occupied or vacant, though vacancy may affect premiums and coverage terms.

In contrast, LRO insurance covers only the building and only when it is vacant. It is often more affordable than comprehensive landlord policies but offers limited protection. Landlords may use LRO insurance as a temporary solution during tenant turnover or extended vacancies. This makes it an attractive option for those who manage multiple properties and want to minimize costs during periods without tenants. However, it’s important to note that while LRO insurance can save money, it may leave landlords vulnerable to unexpected damages or liabilities that could arise during vacancy periods.

LRO Insurance vs. Homeowner’s Insurance

Homeowner’s insurance is designed for owner-occupied properties and generally excludes coverage for rental activities. Using a homeowner’s policy for a rental property can lead to denied claims if damage occurs during tenant occupancy or vacancy. LRO insurance fills this gap by providing coverage tailored to rental properties when unoccupied.

Additionally, homeowner’s insurance often comes with strict requirements regarding occupancy and usage, which can complicate matters for landlords. For instance, if a landlord occasionally rents out a room or a portion of their home, they may inadvertently breach their homeowner’s policy terms. LRO insurance, on the other hand, is specifically structured to accommodate the unique needs of landlords, offering peace of mind that their property is protected during those critical times when it is not generating rental income.

When to Choose LRO Insurance

LRO insurance is ideal for landlords who:

• Own properties that are frequently vacant between tenants
• Want cost-effective coverage for buildings during vacancy periods
• Do not require liability or tenant-related coverage during vacancy

However, landlords with long-term tenants or those seeking comprehensive protection should consider standard landlord insurance policies. Furthermore, landlords should also assess the specific risks associated with their properties. For example, properties located in areas prone to natural disasters may require additional coverage that LRO insurance does not provide. Similarly, if a landlord is considering renovations or upgrades during vacancy periods, they may want to ensure that their insurance policy adequately covers any potential damages that could occur during construction. Understanding these nuances can help landlords make the best choice for their individual circumstances and investment strategies.

Several variables influence the premium rates landlords can expect to pay for LRO insurance in Colorado. Understanding these factors helps landlords budget appropriately and shop for competitive quotes.

1. Location of the Property

Properties located in areas prone to natural disasters such as wildfires, hailstorms, or flooding may have higher premiums. For example, mountain communities near wildfire zones could face increased rates compared to properties in urban Denver. Additionally, urban areas with high crime rates may also see elevated premiums due to the increased risk of vandalism or theft. Insurers often analyze crime statistics and environmental reports to assess the risk associated with a particular location, making it essential for landlords to be aware of their neighborhood's safety profile.

2. Property Age and Condition

Older buildings or those with outdated electrical, plumbing, or roofing systems may be considered higher risk and result in higher premiums. Well-maintained properties with modern safety features often qualify for discounts. Furthermore, properties that have undergone recent renovations or upgrades can be viewed more favorably by insurers, as these improvements often reduce the likelihood of claims. Landlords should keep thorough records of maintenance and upgrades, as these can be beneficial when negotiating insurance rates or seeking coverage options.

3. Vacancy Duration

Since LRO insurance is designed for vacant properties, the length of vacancy can impact cost. Longer vacancy periods might increase risk and premiums. Some insurers limit coverage duration or require inspections for extended vacancies. It’s also worth noting that properties left vacant for extended periods may be more susceptible to damage from weather, pests, or vandalism, which can further elevate the risk profile. Landlords should consider strategies to minimize vacancy durations, such as offering incentives for shorter leases or staging the property to attract potential tenants more quickly.

4. Coverage Limits and Deductibles

Higher coverage limits and lower deductibles generally lead to increased premiums. Landlords should balance adequate coverage with affordable deductibles to optimize protection and cost. It’s important for landlords to carefully assess their specific needs and potential risks associated with their properties. For instance, a landlord with multiple properties may benefit from a bundled insurance policy, which could offer lower rates and more comprehensive coverage compared to individual policies. Additionally, understanding the nuances of different coverage options—such as liability, property damage, and loss of rental income—can help landlords make informed decisions about their insurance needs.

5. Claims History

A landlord’s prior claims history can affect premiums. Multiple past claims may signal higher risk to insurers, leading to increased rates or policy restrictions. Moreover, even a single claim can have a lasting impact on future premiums, as insurers often view claims history as a predictor of future behavior. Landlords can mitigate this risk by maintaining properties diligently and addressing potential issues before they escalate into claims. Implementing preventive measures, such as regular inspections and maintenance, can not only help reduce the likelihood of claims but also demonstrate to insurers a commitment to responsible property management.

While LRO insurance offers valuable protection, landlords should be aware of common exclusions and limitations that may affect coverage.

Exclusions to Watch For

• Tenant Property: LRO insurance does not cover tenant belongings or personal property.
• Liability Claims: Injuries occurring on the property are typically not covered under LRO policies.
• Flood and Earthquake Damage: These natural disasters often require separate endorsements or policies.
• Maintenance Issues: Damage resulting from neglect or lack of maintenance is usually excluded.

Vacancy-Related Limitations

Policies may restrict coverage if the property remains vacant beyond a specified period. Failure to notify the insurer of extended vacancy can result in denied claims.

Additionally, some insurers require landlords to take specific precautions during vacancy, such as regular inspections or securing the property, to maintain coverage.

Securing the right LRO insurance policy involves several steps to ensure adequate protection and compliance with state regulations.

Step 1: Assess Your Property and Insurance Needs

Evaluate the vacancy patterns, property condition, and risks associated with your rental property. Determine whether LRO insurance aligns with your coverage goals or if a broader landlord insurance policy is more appropriate.

Step 2: Research and Compare Insurance Providers

Not all insurers offer LRO insurance, so it’s important to seek out companies specializing in landlord or property insurance in Colorado. Request quotes from multiple providers to compare coverage options, premiums, and policy terms.

Step 3: Review Policy Details Thoroughly

Pay close attention to coverage limits, exclusions, vacancy clauses, and deductibles. Clarify any questions with insurance agents to avoid surprises during claims.

Step 4: Maintain Compliance and Documentation



Keep records of tenant occupancy, vacancy periods, property inspections, and maintenance activities. Notify your insurer promptly about changes in occupancy status to ensure continuous coverage.

While LRO insurance covers specific risks during vacancy, landlords should consider complementary policies to protect other aspects of their rental business.

1. Standard Landlord Insurance

Provides comprehensive coverage including building protection, landlord liability, and loss of rental income. Suitable for properties with ongoing tenant occupancy.

2. Renters Insurance Requirements

Encouraging or requiring tenants to obtain renters insurance helps protect their personal property and limits landlord liability.

3. Umbrella Insurance

Offers additional liability coverage beyond standard policy limits, providing extra protection against lawsuits or major claims.

4. Flood and Earthquake Insurance

Given Colorado’s susceptibility to flash floods and seismic activity in some regions, separate policies may be necessary to cover these perils.

Colorado landlords face unique challenges when managing rental properties, especially during vacancy periods. Lessor's Risk Only insurance offers targeted protection for the physical building during these times, helping mitigate financial losses from fire, vandalism, and weather-related damage.

However, it is essential to understand the limitations of LRO insurance, including its vacancy restrictions and lack of liability coverage. Landlords should carefully assess their property portfolio, vacancy patterns, and risk tolerance to determine if LRO insurance fits their needs or if a more comprehensive landlord insurance policy is warranted.

By partnering with knowledgeable insurance providers and maintaining clear communication about property status, Colorado landlords can secure the right coverage to protect their investments and ensure long-term success in the rental market.