If a rental property is damaged by fire, flood, earthquake or other national disaster or is faced with a liability lawsuit, insurance is often the only thing that stands between the owner and financial ruin. If you are the owner of a property that rents for more than a couple weeks a year, a homeowner’s insurance policy is not sufficient. As a landlord, it’s important to protect your investment with an insurance policy designed specifically for rental properties. Although you should be sure to consult with a professional insurance agent to get recommendations specific to your situation, here is some helpful information to consider about rental property insurance:
A typical rental property policy will cover fire, theft, damage from weather related events , injury liability or malicious damage.
Most policies have the option of adding on areas of coverage, such as rent guarantee and legal aid, but these add-ons may greatly affect your monthly premium.
Premises liability coverage is important to have as it will protect you in the event that a tenant or one of their guests is injured due to negligence on the property. Something as simple as someone slipping on a puddle of water could result in a law suit totaling hundreds of thousands of dollars, if they are seriously injured.
Property insurance is just as accessible as homeowner’s insurance in terms of finding a supplier. It’s important to consider not only the price of the policy, but also the amount of coverage, the areas that are covered and the amount of the deductible.
When considering your policy, you must decide how you would want your claim settled. You can choose an “actual cash value” option, which will pay the current value of the damaged property, or a “replacement cost” option, which has a higher premium, but will cover the total cost to rebuild and replace damaged property.
You may also want to encourage your renters to secure their own insurance to cover any potential loss of their personal property in the event of a fire or other unforeseen disaster.