(The following is a guest post)
Any person that intends to rent out a house, townhome, or condominium will require landlord’s insurance to protect their property. Rental properties are not covered by traditional homeowner’s insurance policies because of the additional risk associated with people with no financial stake in the home living in the home. Landlord’s insurance is purchased instead to ensure that the property and the landlord are protected.
Simple Landlord’s insurance policies are available from various insurance companies and are designed to shield the property owner from financial losses that may occur due to damage or destruction of the rental property. Many landlords prefer to have insurance coverage that would allow them to completely rebuild the insured structure if need be. Some landlord’s insurance policies provide the replacement cost of the home in the event of total destruction and contents coverage for the owner’s belongings in the home.
A landlord’s insurance policy generally will cover the rental structure, any additional structures on the property, and the landlord’s possessions inside the structure. Different types of landlord’s insurance policies cover different things, so it is important to review what is and what is not covered under the policy you are considering before signing the paperwork. The tenant’s possessions are not covered under the landlord’s insurance policy, so any tenant will want to purchase renter’s insurance to cover their personal possessions.
Landlord’s insurance generally covers these standard perils:
- Fire Damage
- Lightening Strikes
- Wind Damage
- Storm Damage
- Flood Damage
- Ice Damage
- Malicious Destruction
It can be difficult to determine how much landlord’s insurance is needed based on fluctuating market values and the additions that have been added to the home. There are optional insurance riders that can be purchased to cover additional circumstances. Commonly purchased insurance riders include:
- Accidental Damage Riders
- Terrorism Riders
- Legal Protection Riders
- Alternative Accommodation Cost Riders
- Contents Insurance
- Rent Guarantee Insurance
- Liability Insurance
Insurance companies are more likely to experience claims on rental properties. If you are renting out a home on a full time basis, you have an increased responsibility for injuries and accidents to the property, your tenants, and your tenant’s guests. Some renters are not diligent about reporting or identifying maintenance needs, either through ignorance or because they do not care for the property as if it were their purchased property. Some renters are simply unfamiliar with what it takes to completely maintain a home.
Each insurance company will have a specific claims process that must be adhered to for them to investigate and compensate the landlord for the claim. The instructions for the claims process will be disclosed with the terms and conditions of the insurance policy. If there are questions about the claims process, they should be directed to the representatives of the insurance company so that the process can be completely quickly and correctly.
Rental properties are considered to be a higher risk by most insurance companies, so the cost of a landlord’s insurance policy will be more expensive than for a homeowner’s insurance policy for the same home. Landlord’s insurance costs around 15% to 20% more than homeowner’s insurance. The insurance for short-term rentals costs more than insurance for yearlong or longer rental terms. However, there are a number of affordable options available for landlord’s insurance.
Different insurance companies charge different premiums for the same type of policy on the same dwelling, so it is important to shop around for the best price before deciding which insurance company to do business with. Some smaller insurance companies that specialize in landlord’s insurance and related insurance types may be able to offer you a better price than the larger insurance institutions that cover everything from cars to travel. By taking the time to research your options before making a decision, you may be able to save a considerable amount on your landlord’s insurance premiums.