Getting insurance is one of the smartest decisions you can make for your investment property. If you aren’t insured, you may find yourself in financial trouble — or worse, you may have to put your career as a property investor behind you.
With the ideal insurance policy in place, you can mitigate the risks associated with owning a rental property, such as irresponsible tenants, malicious damage, natural disasters, and much more.
If your rental property is your primary means of earning income, you should protect it at all costs. You should start viewing your rental property as a real business. With landlord insurance, you can ensure that your business gets through the toughest of times.
What type of landlord insurance do you need?
Many types of insurance covers are available for landlords and property investors. Also known as insurance coverage, it helps landlords protect themselves from unexpected circumstances. Each landlord insurance coverage encompasses a variety of risks. These include loss of rent/income, builder’s risk insurance, liability insurance, and much more.
It’s important to keep in mind that basic homeowner’s insurance doesn’t provide sufficient coverage to protect a rental home. To keep yourself, your tenants, and your investment property protected, you will need to acquire landlord insurance.
What landlord insurance covers are available?
Consider speaking with a professional property manager to discuss your specific situation. Not all rental properties are the same. A single-family home by the beach has different insurance needs than a condominium in downtown Miami. You don’t want to risk under-insuring or over-insuring your real estate investment.
Let’s take a look at some of the types of insurance covers for landlords and property investors:
#1 Property Damage
In the event that the structural components of your rental property are damaged due to natural disasters (e.g, earthquakes, floods, and hurricanes), vandalism, fire, or irresponsible renters, this type of coverage allows you to offload the costs of repairs. If your rental home has outdated furnishings and fixtures, consider getting an insurance policy that offers the replacement cost and not the actual cash value.
Essentially, “replacement cost” is the amount that it would take to rebuild your rental property. On the other hand, “actual cash value” is the damaged item’s actual value with depreciation.
#2 Loss of Rental Income
This type of landlord insurance cover is also called the “rental default insurance”. It’s important to treat your investment property as a business. If it gets damaged beyond repair or no longer meets the minimum standards of habitability, you will lose money. A loss of income coverage replaces the rental income that you would otherwise have received if the property was occupied.
Loss of income is typically bundled with other types of landlord insurance. Consider consulting an insurance agent or property manager, as obtaining loss of income coverage alongside landlord insurance may be less expensive.
#3 Liability Coverage
Injuries and accidents can happen on your rental property. Whether it’s your tenant falling down the stairs or your contractor falling off the roof, you may be deemed responsible. And while the landlord’s liability is determined on a case-to-case basis, obtaining liability coverage is always a good idea.
For instance, if your tenant injured himself or herself while going down the stairs after you failed to repair the broken railing, you may be held liable, as it is your responsibility to ensure the safety of the home.
#4 Builder’s Risk Insurance
If you purchased an investment property that’s “rent-ready”, there’s no need to obtain builder’s risk insurance. This type of insurance applies only to property investors who are renovating or “flipping” homes — or even building a home from scratch.
Builder’s risk insurance protects you from contractor injuries, vandalism, and property damage. Since this type of property is considered high-risk, you may not qualify for other types of insurance. It is also more expensive than other types of insurance covers.
#5 Flood Insurance
Floor insurance is necessary if your rental property is in a flood-prone area. If your property is in an area that’s not a flood zone, but occasionally suffers from severe storms, it may be best to obtain this type of insurance. It’s better to be prepared than to learn the hard way.
Keep in mind that your homeowners insurance policy may not cover flooding caused by external factors (e.g., not caused by a leak). Without flood insurance, you may have a hard time covering your losses.
#6 Legal Costs
In the event that your tenant sues you for damages, you will need an attorney to represent you. Litigation costs can be expensive — especially if you aren’t on the winning side. This insurance coverage, although not as vital as the others, can cover the expenses that you will incur when going to court.
#7 Emergency Coverage
If your tenant calls you in the middle of the night to report something such as a leaking faucet, or if they accidentally locked themselves out of the house, emergency coverage can cover a portion of the costs that you or your property management company incurred in driving to the property to address the issue.
How much does landlord insurance cost?
The cost of landlord insurance varies by insurer, the type of policy, and the premiums that you avail. It’s important to compare different insurance policies, as not all insurance policies were made equal.
Typically, however, landlord insurance is more costly than homeowners insurance. This is because landlord insurance provides more protection to tenant-occupied units, which are considered riskier than owner-occupied homes.
Conclusion
Getting insurance for your rental home prepares you for the unexpected. And while proper property management can prevent these “disastrous” situations from happening in the first place, it always pays to have an insurance policy that you can rely on.
At Luxury Property Care, we can help you find the insurance policy that suits your property’s unique needs. Get in touch with us today by calling (561) 944 – 2992 or by completing the contact form on our website.
