Landlord insurance is the type of insurance that comes in place when your home is rented to other people as regularly as possible. It covers risks associated with a rental property, as well as protecting your home. With regards to the type of property you have, there are different coverage options that you can choose from in the policy.
It is erroneous to think your homeowner’s insurance will cover all the required costs when natural disaster or accident happens. This line of thought is typical of novice landlords who are renting out residential apartments for the first time—like a house, vacation apartment, cottages, etc.
Well, it is not out of sort to think that way—but such a mistake could cost you dearly going forward.
What is obtainable, however, is that your policy will cover for owner-occupied homes. If you start to rent out to other people, you’ll realize that the coverage is null and void. You will suffer an injury on the property because renters are not liable when a large appliance malfunctions— through no fault of the tenant—or if the house is burgled. You may be left out to dry for these or even other misfortunes as a result of humans or natural disasters.
And this is the point where landlord insurance comes to play. These policies manifest in all shapes and sizes. Before you enter the market for price shopping, put into consideration what needs to be addressed and protected in your rental property.
The Provisions
A comprehensive landlord insurance policy will come with three core protections:
Property Damage
This coverage comes to play when a natural disaster affects your property or fire, electric malfunction, vandalism or the like. If you can get a policy that provides replacement value or replacement cost, rather than the actual value—or a predetermined amount of cash—then you’re good to go. This suffices when furnishings and fixtures are obsolete.
Rental Default Insurance
If your property becomes uninhabitable for whatever reason—termites, mould, rat infestation, etc.—this feature allows you to get a temporary rental reimbursement. This will cover for the rent money that would have come to you if the tenant is occupying the property.
Liability Protection
This coverage comes in for legal or medical costs in case of an injury by a tenant or a visitor as regards property maintenance issues—architectural collapse, icy walkways, or even an out-of-control bees.
Packages from underwriters being referred to a DP-1, DP-2, or DP-3, represents dwelling property—that is what DP stands for. Before you get lost or confused, each of these terms refers to varying levels of coverage. The DP-1 represents the most basic, while DPS is the most comprehensive insurance.
Additional Coverage
New homeowners have a lot to learn—but they will get used to these terms with time. There are familiar riders that are integral parts of landlord insurance policies. However, they’re not as essential when compared to the critical provisions stated above. With that said, they still come handy to save you money in the long haul.
Guaranteed income Insurance
In a situation where the tenant does not meet up with rent in one month, this insurance will cover the landlord.
Flood insurance
Most landlord insurance policies do not cover for flood damage when it comes to municipal plumbing or natural disaster. If you own a property in a location prone to flood, it might be worth including this feature. You can also discover the Airbnb value of your property in 60 seconds on Portico.com, if that is what you use your home for and it is close to a river/lake or sea.
Emergency Coverage
If you have to fix anything for the tenant, this feature will be appropriate to cover the cost or part of the cost incurred when you travel to the property to fix the problem.
How Much Does Landlord Insurance Cost?
Having such information at your disposal is easy—run a quick quote here. That is the best thing to do at this juncture.
To give you an idea, here is an opinion—the cost of landlord insurance depends on different things, for example, the cover levels and the type of cover you decide to go for. It also includes the details that are specific to your property, like age, location and the type of tenant occupying the property. Also, the security that is put in place could be vital in determining the cost of the policy.
As it is common with all types of insurance, insurers will factor in the possibility of you making a claim when they calculate your premium.
Ensure that you answer all questions as accurately as possible when buying your landlord insurance. Otherwise, you may be left out when it comes to making a claim.
An inverse relationship exists between the price of your premium and the time the property has been in service. You could pay more in annual premium if the rent were only for 12 weeks—rather than for a year.
The idea behind this is that short-term tenants will most likely not notice maintenance issues. They may not understand the layout of the building, or they may be the careless type. All of these put together can increase the problems, as well as the insurer’s risk.
Make sure to ask for bundle options from your homeowners’ insurance provider. You could get a discount if you sign up for homeowner and landlord insurance via the same company.
Is Landlord Insurance a Good Idea?
When you rent out your home, landlord insurance will always be a good idea. If your home is used for other reasons aside from dwelling, bring it to the knowledge of the insurance company. Otherwise, you’ll not be paid for any claim. Make sure you speak to an insurance broker concerning your situation for the best option to go with.
Conclusion
Before going ahead to rent out your property, have a critical look at your homeowners’ insurance policy. Never base your assumption on the fact that it will cover liabilities and damages while you don’t live there. Landlord insurance will always be important.
It is proper to recommend that your tenant goes for a renter’s insurance policy, so their belongings will cover when an accident happens.