Are you considering renting out your extra property, or investing in an apartment complex or condominium? Becoming a landlord can have many benefits, but also comes with specific risks.
A landlord insurance policy will protect you, the landlord, from events that your personal home insurance will not cover for a rental property. If you own more than one home, having insurance on multiple properties may require varying policies or coverages specific to each property. Continue reading to better understand landlord insurance, and to determine if a landlord insurance policy may be right for you.
What Is Landlord Insurance?
Landlord insurance is a specific type of coverage designed for the owners of rental properties, anywhere from one to four units. This can include apartments, condominiums and single- or multi-family homes that you own and then provide as a rental to others.
Landlord insurance can also apply to “accidental landlords”; this occurs if you rent the house you just moved out of and haven’t been able to sell. While you’re not legally required to have landlord insurance, many lenders will require it if you have a mortgage or loan on the property.
What Does Landlord Insurance Cover?
In addition to the property being rented out, landlords may also own other tools and appliances specific to the rental property that the tenants may have access to. Landlord insurance can cover items such as a washer and dryer, lawnmower or snowblower, a garage or a shed.
It will also protect you from loss of income if something happens to your building, such as a gas leak or burst pipe, and the tenants can not live there while it is repaired. Make sure that your coverage for rental loss is equal to the gross income from rent for the entire building, to avoid any/all income loss.
If a tenant creates accidental or purposeful damage, certain policies will cover this as well. Requiring a security deposit at lease signing will help cover any additional cost of tenant related damages. Landlord’s insurance does not cover the personal property of the tenant; this is covered by a renters insurance policy which is purchased by the tenant. Although this type of policy is not a legal requirement, in some states, you may be allowed to require renters to have this property as part of their lease agreement. This can be determined by consulting an experienced insurance provider.
Landlord insurance can also protect you from a variety of legal issues. Liability insurance is a valuable safeguard, particularly when providing more than one property for rent, or to multiple renters. This policy will provide coverage associated with slander or libel, being sued for wrongful eviction and will cover most legal fees resulting from lawsuits associated with the property. If someone is injured on the property, landlord insurance will also help cover medical costs for the injured party.
Adding Multiple Properties To A Landlord Insurance Policy
Whether you started with one and added more, or started with multiple properties, you may have multiple policies or multiple insurance companies covering your rental properties. The most convenient and least expensive way to manage multiple properties with landlord insurance is to have one policy from which you may add or take away properties as they come and go. Quite often, many insurance companies will offer a bulk discount for insuring multiple properties.
If you accumulate more than four properties, you must take the Commercial Lines approach and acquire your insurance as an LLC. This is much safer for you as an individual and poses far less risk to your reputation and assets. For example, if your rental company is sued, your private assets are protected, and only the company is liable. Having a large umbrella policy is also very helpful in these situations.
Landlord Insurance Additional Options
When establishing your landlord insurance policy, reading and understanding everything you are signing is very important. Depending on the location, some options may be more necessary than others.
For instance, while the average landlord policy does not cover events such as floods or earthquakes, you can add those options to your policy for an additional cost. Likewise, for multiple properties, you may choose to add additional protection to some properties and not others, depending on the location and risk.
If you have an older or possibly damaged property, you can also purchase additional construction insurance that will cover changes required to bring the building into code compliance. This could include removing lead paint, repainting or adding a safer railing to a staircase.
Ensure Your Properties Are Protected
Whether you are thinking about purchasing a rental property, or you already have several, be knowledgeable about your insurance policy and coverages. It only takes one incident or accident to create serious financial and reputational damage without the proper coverage. Having adequate coverage can be what saves and grows a real estate business. Reach out to experts at Pro Insurance Group to ask questions, get quotes and secure your properties with an experienced professional.