The Right Way to Insure Your Rental Properties

Owning rental property can be an ideal way to earn extra money. In fact, some landlords make it their full-time job. Do you own at least one rental property? If so, one of your main responsibilities as a landlord is making sure you have the correct insurance coverage for your rentals. But if you think all you need to do is buy a standard homeowner’s policy, you’re wrong. Instead, you need a landlord’s insurance policy. Here is the right way to insure rental property, along with what’s included and not included in a landlord’s policy.

Why You Need a Landlord’s Policy

Even though you can receive coverage for issues arising through homeownership in a standard homeowner’s insurance policy, it still doesn’t provide the additional liability coverage needed for covering tenants. That’s why you need a landlord’s insurance policy, which offers insurance coverage suited for your needs as a landlord.

Why a Landlord’s Policy Costs More than a Standard Homeowner’s Policy

These policies usually cost more than a standard homeowner’s policy. The reason is mainly that landlords don’t live at their rental properties. This makes their dwellings more likely to suffer from abuse or damage. Also, renters aren’t as motivated to maintain their dwellings. As a result, landlord insurance can be more expensive because of higher risks and additional liability protection that is needed.

Property Protection Coverage

A landlord insurance policy typically includes two basic kinds of coverage. These include property protection and liability protection, which are both designed to protect you as a landlord from losing money.

• Property protection, which helps in paying for repairs and damage from wind, fire, hail and other acts of nature, covers a physical dwelling, including the house and equipment used for maintaining the dwelling.
• Other structures—This portion of a landlord’s insurance policy is used to pay for repairs involving damaged structures that are attached to a rental, such as a fence or a garage.
• Personal property you use to maintain a rental is also a part of property protection. For example, let’s say you’ve left a lawn mower outdoors that are used for cutting grass on a rental property. If it becomes damaged, your landlord policy may help in covering the cost of repairing it. On the other, if an item is damaged that isn’t used for maintaining a rental, such as a radio or a bicycle, don’t expect to receive coverage.

Liability Protection Coverage

This part of your landlord’s policy helps in paying for someone’s legal or medical expenses when you’re responsible for injuries they’ve encountered on your rental property. A common example is a tenant slipping on ice that you haven’t removed from a driveway or a renter falling down stairs that you should have repaired.

What’s Generally Not Covered in a Landlord’s Insurance Policy

Some things aren’t covered in a landlord’s policy, such as:

• Tenants’ belongings—These include a renter’s personal items, such as clothing, electronics, and other items. For tenants to be covered, they need to buy a renter’s insurance policy.
• Equipment breakdowns—This means that if a washing machine or another appliance breaks down, it’s your job to pay for repairs or replacements.
• Shared property—You can’t get a landlord’s insurance policy if you reside on a property that has tenants renting out another floor or a room, says the National Association of Insurance Commissions. In other words, a landlord’s policy is for property that is not occupied by the owner.

Optional Coverages to Consider

Depending on your geographical location, besides the neighborhood of your property and the condition, it’s in, you may want to consider including some optional coverage, such as:

• Vandalism coverage—Keep in mind that vandalism is not included in a standard landlord’s policy.
• Burglary coverage is another optional as, in most cases, a standard landlord’s policy doesn’t cover replacing stolen belongings although it does help in paying for repairs for damage done in break-ins.
• Furthermore, if you have a rental property that’s under construction, consider buying extra coverage so that your structure will be protected while being built.

Other Considerations and Warnings

• The cost of a policy can depend on location. For instance, if your rental property is in a gated community, near a major water source or close to the fire department, you may be offered a discount.
• When filing an insurance claim for a rental property, be sure to list it as a landlord policy because if you don’t, your claim may be denied.
• If county or city building codes have changed since the time your rental property was first built, you may be legally required to pay for upgrades in wiring, ventilation and other items. Thus, you may need coverage for reimbursement costs.

Questions? Visit the insurance pros at InsureYourCompany.com where we provide business insurance to hundreds of small New Jersey businesses as well as nationwide. Please contact us for all your commercial insurance needs.