Revised and Updated by Levio Poletti
In this article, we will cover the important role that insurance policies play in maintaining the stability of your property. If you are curious about the state of your insurance, ask yourself the following questions:
When did you last review your insurance policy for your rental property?
Review your policy immediately if you have not done so within the last year. Discuss any possible changes to the current coverage and go over needed updates with your insurance agent.
If you previously lived in the property, do you still have your homeowners insurance covering the property?
If you used to reside in the property that you are now offering for rent, and you never changed your policy after moving out, then part or all of the insurance covering that property could be invalid.
Do you have a rental/landlord policy?
A rental/landlord policy is effectively a liability policy. This sort of policy protects you against damages incurred from vandalism, fire, or other natural disasters. It is also crucial that your policy covers the cost of lost rent for when you are rebuilding or rehabilitating your property.
Have you shopped your insurance lately?
Even if you have an insurance policy in place, it is still an excellent idea to get competitive quotes. However, if you do this, do not let your insurance lapse while researching other rates. While many companies are continuing to renew existing rental/landlord policies, there are still many that are not issuing new policies because of high profile problems like mold or natural disasters. Make sure you only discontinue your current existing policy when you are certain that you have a new insurance policy in place.
Do you have enough coverage in the event of a fire or disaster?
If you haven’t updated your policy in several years, there is a chance that the insurance coverage is now less than the current replacement value of the property. Use a reliable source to research your current property.
Do you have enough liability insurance?
While increases in liability are normally very small in cost per $100,000, a policy worth that amount covers very little when it comes to attorneys fees and costs. An umbrella policy worth $1-2,000,000 is highly recommended, should you be sued for any reason. Be sure to look out for policy options that claim to cover “all risk”. It is often the case that these policies contain a long list of things that are excluded.
What items should the liability insurance cover?
A fully comprehensive policy will cover:
- Injuries on the property
- Defense of personal injury lawsuits
- Unlawful and retaliatory eviction
- and invasion of privacy for tenants and their guests
While it may not be possible to obtain all of these coverages with an insurance company, landlords should try to obtain the most coverage possible.
Where is my policy going and who is making the payment?
It is important that your insurance policy is only being sent to correct addresses; this includes the location of your mortgage company, your property manager, and of course, you. many mortgage companies will be quick to put on an expensive insurance policy to cover the loan because they believe that your insurance has lapsed. Your agent should be able to help you with all of this.
What about insurance for the tenant’s contents?
For the most part, insurance companies do not cover a tenant’s possessions and tenants are strongly urged to obtain their own renter’s insurance.
Never wait until a problem occurs. In order to make sure that your unit is adequately covered, review your policy on a yearly basis with your insurance agent.