There are important steps that investors must take to
ensure the success of their rental property; one of the most critical
is that of procuring the right property insurance.
As your property management company, we cannot advise you
specifically on what insurance policy to purchase. The purpose of this
article is simply to make you aware of common insurance facts and
questions that are important to ask your insurance provider. Failing to
know what coverage you have could lead to major financial loss in the
Does my property have the right insurance for an
investment/rental property? This is THE key question
to ask. Many people do not realize that a normal homeowner's insurance
policy is generally invalid within 30 days after vacating the property
and converting it to a rental property. A different policy should be
put in place as soon as possible.
In addition, the best insurance for a rental policy will
give you additional coverages, such as loss of rent. The type of
insurance coverage for landlords generally falls under the umbrella
term "property and casualty insurance."
What type or types of insurance do I currently have on my
rental property? Building coverage,
hazard and fire Insurance, as well as liability insurance, are always
needed for the physical property. However, there are additional
insurances that can be carried, depending on the location of the
property, age of the property, and other extenuating factors. Other
insurances to investigate are flood insurance if you are in a flood
plain, sewer backup insurance, workman's compensation, terrorism
insurance, and loss of income insurance. Question your agent on your
current insurance and what other policies are available that would be
appropriate for your investment and worth the cost.
A big key to obtaining the right insurance is to provide
your agent with ALL the facts - age of the property, condition, area
problems, special use, etc. It is very important to be specific on what
"type" of investment property you have (for example, horse
property, condominium, single-family, apartment etc.). Most landlord
insurances are for 1-4 units and multiple units above this number are
handled on a different basis.
I have outbuildings on my rental property, are they
covered? Most policies generally do not include additional
structures, unless specified. This is another reason why you need to
disclose all the information to your insurance agent and obtain quotes.
Is my property covered for loss of rent? Covering
rental loss, under the right circumstance (such as a building fire), is
one of the pressing reasons for obtaining a good landlord/rental
policy. There is no coverage for tenants giving a standard notice to
quit and vacating the premises. However, it may cover vandalism during
an eviction or vacancy - but you need to ask. Have your agent discuss
in detail the paragraphs in your insurance paperwork which pertain to
vacancies / income loss and what is your actual coverage.
Is my property covered for disasters such as fire,
tornado, hurricane, tsunami, flood, and more? Normally,
most natural disasters are not covered. However, the insurance company
may make a determination that many damages are covered. For example,
although a flood isn't covered, there may be coverage for "water
damage." Another example, a house fire is usually covered for
damage as long as the landlord has not shown neglect which caused the
fire. The insurance company will have a list of criteria for what is
and what is not covered for extreme conditions under the existing
policy. Again, find out the facts, ask questions.
How can I reduce the cost of my landlord policy?
Landlord insurance is more expensive than a homeowner policy and the
main reason for the increased cost is that a landlord doesn't have any
control over a tenant's actions, implying additional elements of risk.
In spite of the higher cost, landlord insurance can be made more
affordable through discounts for having security alarms, especially
monitored ones, burglar alarms, deadbolt locks, and fire extinguishers.
Ask your agent for recommendations on cost-saving items you can do.
Remember, landlord insurance IS worth the cost.
It is of utmost importance and your responsibility to
consult your insurance provider regarding your coverage. It is also
part of your contract with us that you provide our company with proof
There are many insurance companies and plans available and
it pays to compare coverage. If your agent cannot spare you the time to
answer your questions, seriously think about shopping for another agent
and/or company. Review your policies at least once a year, require that
your agent provide you with the facts, and take out the best possible
policy for your
property to protect your investment.