As a landlord and property owner, you often face unexpected surprises and issues that pop-up with your residential rental properties. While landlord insurance is not required, it’s a wise choice to have if you regularly rent out your property (and don’t live on the premises). Landlord insurance is designed to protect you from loss of rental income as a result of damage to your rental unit from fire, inclement weather conditions and other uncontrollable factors that might leave your unit vacant until damages are fixed.
Did you know that if you file a claim on a rental property, but the policy is not considered a Landlord Policy, the insurance company may reject the claim?
It’s important to know that not all landlord insurance policies are created the same; some policies may include one or all of the following types of damage. The basic components of a landlord insurance policy include:
- Property damage: covers damage to your property from fire, theft, inclement weather, etc.
- Liability insurance: covers any liability lawsuits and claims from visitors or tenants.
- Loss of income: covers loss of rent in case your property is uninhabitable.
- Additional or optional coverage: other options may be included like landlord contents insurance (should you have personal property onsite), medical liability insurance, etc.
The Three Types of Landlord Insurance Categories
“DP” stands for dwelling policy:
- DP-1: This is a very basic policy which just covers common incidents such as fire and vandalism.
- DP-2: A more comprehensive policy which covers less common incidents including damage from storms and if a car damages your building.
- DP-3: The most comprehensive policy which essentially covers all potential perils; however, it may have some exclusions.
These policies may reimburse you via cash value, OR replacement value of damaged items (often a more accurate reflection and higher amount).
Important Clauses to Keep in Mind
Shop around for an insurance policy that includes these important clauses:
- Guaranteed Replacement Cost for Dwelling Coverage. Dwelling coverage includes basic structural damage to your property including plumbing, piping, fixtures and any fixed appliances. Guaranteed replacement cost provides you with the cost to replace your building at the time of the incident, rather than the replacement cost at the time you took out your policy.
- Water and Flood Damage. It’s never a good day if your property is damaged via a burst pipe. Plumbing issues are generally covered with a basic policy, however, consider getting water and flood damage which covers natural disasters and unforeseen sewer backups.
- Acts of Nature. If you live in an area that is prone to hurricanes, tornados, and earthquakes, consider getting insurance coverage for acts of nature. Contrary to what most people believe, this coverage is something that needs to be specifically requested.
- Fair Rental Income Protection. Should your property become uninhabitable due to some type of damage, this policy can provide you with fair rent for a specified amount of time. Note that this doesn’t cover vacancies or loss of rent from tenants who don’t pay.
Having a strong landlord insurance policy can get you out of a financial pinch should you need help. Do your research about different policies and never assume your policy provides certain types of coverage.
Call today to see how much we can save you on your Landlord Insurance needs at 800.644.6443.