We will be discussing landlord insurance coverage types in this Part 1 of a 3-Part blog.
If you have purchased an investment property either to fix up and flip or to rent out then you need to make sure that you are covered properly under the right insurance policy. Investment properties are similar to that of a primary home insurance policy but with several differences.
If at any time you move out of your home and it has become vacant or if you are renting it to a tenant then you will need to call your insurance agent right away to make sure that you are covered appropriately. Depending on your insurance company, you generally have between 30-60 days to update your policy or you could be denied coverage in the result of a claim.
Insurance companies need to rate the risk accordingly. For instance, the risk of a vacant property having a claim is much higher than that of one on your primary home. These risks could be fire, theft, vandalism, etc. Many carriers can rewrite your policy to a vacant dwelling and in many cases convert this policy to a rental dwelling once you have found a tenant to move in.
There are several coverage types you will want to think about changing on your policy once you have a home that is up for rent or up for sale.
Liability Coverage- In today’s litigious society you really need to consider increasing your liability coverage as high as possible. You can be sued by your tenant, tenant’s guests, contractors, delivery persons, etc.
Vandalism and Malicious Mischief- This covers damage to your property due to vandals damaging your property or theft of various items.
Contents Coverage- This is one of the coverage types that you can decrease to your desired level. Once you have all of your personal belongings and furniture out of the home, you won’t need the higher coverage. Most investors will decrease this coverage to $5,000-10,000 to cover appliances or any minimal amount of items they own that are left in the dwelling.
Loss of Rent- Also known as Rent Loss and Rental Income. This type of coverage pays you for any loss of rental income you would incur in the event of a fire or covered peril.
Water and Sewer Backup- This is one coverage that most people don’t realize is not generally covered under their property insurance unless you endorse it. It is also handy to have on your primary home insurance policy as well. This covers any back up of water or sewer pipes coming back into your home. You choose the limit you wish here which generally starts at $5,00 or $10,000 depending on your insurance company. A lesser deductible sometimes applies compared to your all other perils deductible.