Insurance is a crucial element for rental property owners and typically requires several considerations when finding the best coverage. If you’re like most landlords, you can’t risk the huge out of pocket cost of repairing possible destruction or disasters on your property, so it’s important to make sure you have the right amount of insurance. And since there isn’t really one policy that covers every risk, the best approach is to combine several insurance plans for full coverage.
Some of the most crucial types of coverage for property owners includes:
In this article:
Did you know that standard homeowners insurance is not enough to cover you? It’s a common mistake to only get this type of coverage when buying a rental home. But homeowners insurance only covers the resident owner and their family, not the tenants on the property. In the event of a tenant becoming hurt or injured while on the property, their cost for hospital bills and other damages will not be covered. This a critical mistake, as their only option will be to sue the property owner, and no property owner wants to deal with the headache of a tenant lawsuit.
To prevent a situation where you are forced into declaring bankruptcy or having your assets seized, make sure you look for landlord insurance policies that protect in the case of rental income loss and “all risks.”
Vacant Property Insurance
If you’re finding your property vacant for over two months, you might want to consider vacant property insurance. This is important because a long-term vacancy increases your chances of squatting, vandalism, or mold or flooding. If you don’t want to buy insurance for this, it’s a good idea to instead look for a house sitter in between occupancies.
Flooding is only covered under landlord or homeowners insurance if it’s due to an exploding pipe or similar causes—but that does not include flash floods or rainstorms
There are two parts to flood insurance: contents and structure. And there is only limited coverage for areas below ground, like basements.
There are normally four components to a fire insurance policy: dwelling, loss of use, other structures, and personal property. Fire insurance covers the cost of rebuilding or repairing structures that have been destroyed or damaged by fire. The tenant will usually be responsible for their own property in this case.
This won’t be covered by standard insurance policies, so you should consider it if you live in earthquake-prone areas.
Like earthquake insurance, this can be location specific but is not covered by standard policies.
These are just a few of the types of policies you should consider combining to protect yourself and your property. Other includes personal umbrella policy (PUP), sinkhole insurance, and commerical umbrella insurance. For more information, speak with your homeowner association management company.