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When you make the decision to rent out property for either commercial or residential reasons, you take on a very special role as landlord. Your responsibilities become quite different, and the decisions you have to make become more important since they will affect both you and the renter. One of the responsibilities that you must undertake is making sure your property is covered with the correct landlord insurance.
Since the coverages and insurance policies available for landlords are quite unique, they can draw quite a few questions, especially if you are new to the landlord business. Just as when you purchase any sort of coverage policy, with this type, you will need to make sure that your questions are properly answered. Understanding the policy, what it covers and what it does not can save you from problematic surprises in the future.
While you may have more questions to do with your own situation, you will gain a great deal of knowledge from the following answers to the top five landlord insurance questions you may have.
1. Is this type of insurance different from homeowner’s policies? Often, people may think that they will get by with a homeowner’s insurance coverage on properties that they are renting out. However, this could lead to a very big problem if a claim has to be made. Most insurance companies will not pay for a claim on a rented out property that is only covered by homeowner’s policies.
This is mainly due to the fact that a property that is being rented out holds a great deal more liability than a standard residence. If you are a landlord, you must understand that you will have to choose the correct insurance if you want to make sure your property is properly covered.
2. What does landlord insurance cover then? This type of insurance will cover the rental property itself. This means that it covers the physical building and its land. It will not cover the belongings of the renters who are using the property. It will be the responsibility of the renters to choose insurance of their own to cover their belongings.
3. Are all of these policies the same? There are actually two main types of landowner policies. The two types include commercial and residential coverage. These two types vary greatly in cost and coverage however.
The policies that cover residential rental properties can only be used if you are renting out your property to be lived in as a home. You cannot use this type of insurance to cover any sort of business. This type of coverage is made to pay for any damage to a standard home property.
The other type of policy is commercial landlord insurance. This type of policy is made to cover buildings that are used for any commercial purposes, like stores, restaurants, offices, daycare centers, or any sort of business. This type of coverage will cost more since it is designed to handle any liability claims as well as any damage to the physical location.
4. Are there other types of insurance add-ons that a landlord should consider? There are two other policy additions that you should consider. These could help protect you as a landlord. Legal expenses policies will help protect you if you have to take an issue with the renter to court. For example, if a renter continually damages a property or does not pay rent and you must sue them, the insurance will pay your legal costs. Rent-arrears insurance will help cover your losses if you are not able to collect back rent for a renter that does not pay their agreement.
5. Do I have to own a landlord insurance policy? While you do not have to legally own the policy, you are taking a great risk if you do not have the coverage. Since there is no end to the damage that could happen to your properties, you could stand to lose a great deal. By having the proper coverage, you can make sure you will not suffer from these losses.
As a landlord, you are in a unique situation. You will have your own set of responsibilities. You will need to make sure your property is correctly covered in order to protect your assets.
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Landlord insurance is designed to protect owners against damages and loss to their property. It often includes provisions protecting landlords against tenant activities as well as naturally occurring issues with older buildings. In some areas, having landlord insurance may be required before the building can be rented to commercial or residential tenants.
It is also important to note that landlord insurance is available for large commercial properties or individual residences. The individual residence option is becoming more popular, as people who have found that they can’t sell their home in the current market opt to rent out the property. Landlord insurance can help make the transition from owner to property manager a smooth one.
Landlord insurance is available from many of the same insurance companies that offer homeowners or renters insurance. It is also often available from corporate insurance agencies. Dedicated companies also exist, although these are less common than the other providers.
Information Needed For A Landlord Insurance Quote
Getting a landlord insurance quote is a bit more complex than getting a simple homeowners quote. You will need the same information about the age and condition of the building, but you will also be asked about the number and type of tenants in the building. Thus, you will want to have both the architectural information and the financial report for the building’s tenants at hand when you ask for a quote.
Expect to be asked many questions about building security and maintenance during the quotation process. Underwriters are looking for landlords who care for their buildings, and also trying to appropriately assess the risk levels of theft and vandalism when giving their price for the coverage. While this can be more time consuming than a basic homeowners quote, it can help provide more customized coverage to you.
Common Landlord Insurance Policy Features
Landlord insurance policies contain the same features as many homeowners policies with several additional features added for you as the owner of the building. Commonly included landlord insurance policy features are:
- Building Insurance. This insurance covers the cost of repairing or replacing the building. Fire, termites, and wind damage generally fall under the umbrella of building insurance.
- Contents Insurance. Having contents insurance is important even if you are offering the building as an unfurnished property. As a landlord, your contents insurance goes beyond simple sofas and includes fixtures, wiring, and many other interior pieces that keep the building in working order.
- Liability Insurance. This insurance section protects you from personal injury cases for people injured while in or around your property. This element is often required in commercial rentals.
- Tenant Damage Insurance. Tenant damage insurance covers your loss when your tenants willfully or accidentally damage the building or fixtures. This may require special supporting documentation to verify the condition of the property originally to prepare for the possibility of future claims.
- Loss of Rent Insurance. This insurance pays out when damage or accidents have made your building unusable, making up the difference caused by a lack of tenants in the structure.
- Alternative Accommodation Insurance. This is more common with residential properties, and covers the cost of re-housing tenants in the event that the building is uninhabitable.
Landlord Insurance Discounts Available
Discounts on landlord insurance coverage are available for multiple properties, safety and security features, and multiple years with no claims. Multiple property discounts generally only apply to other landlord insurance lines, although some companies allow mixed policies to qualify for discounts.
Safety and security features earning discounts on landlord insurance often vary structure by structure. Cameras on commercial property, fire sprinkler systems, and home alarm systems could all qualify for insurance discounts. Talk with your underwriter or insurance agent to see what security features will get you the best discounts on your landlord’s insurance.
Landlord Insurance Exclusions To Note
Most landlord insurance policies are fairly comprehensive. Exclusions in policies often focus in on regional issues, such as flooding, and on specific types of designated hazards, such as swimming pools in residential properties. Read the fine print on the policy carefully and challenge underwriters to be sure that you have all the coverage you need and no surprises waiting for you up the road!
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