Many first time landlords can make the mistake of assuming that their homeowner’s will cover all the costs of their rental property in the event that something happens to their rental property. Unfortunately, that isn’t always the case. But don’t worry. We’re here to help you out and explain why a landlord protection policy is not only a good idea but essential if you plan to rent out a property.
In most cases, your homeowner’s policy will only cover the home that you live in yourself. Once a property becomes tenant occupied, the coverage from your homeowner’s policy no longer applies. Since renters are not generally held responsible when a large appliance malfunctions, someone gets injured on the property or there is a burglary, you are the one that will be held liable.
This is why landlord insurance is something that you need. Landlord (or Dwelling Fire) policies are just like homeowner’s policies in that you should make sure that your policy best serves your needs and the property that it is covering.
Now that you know what it is, what exactly should you be looking for in a landlord insurance policy?
First of all, a good landlord insurance policy should offer you three main coverages:
First up is property damage. This is what will cover you in the event that the property or its contents are damaged in a natural disaster such as fire or electric/gas malfunction. It also covers for vandalism of the property or damage caused by irresponsible tenants. If you can, it is always better to purchase a policy that will offer you replacement cost of the property or contents, rather than actual value or a predetermined lump sum of cash. That way you can actually replace the property or furnishings, rather than receiving payment for their depreciated value.
Next is lost rental income or rental default insurance. This coverage is important if something happens to the property which causes it to become totally uninhabitable. Think major fire damage or anything that would keep you from being able to rent the property out. This particular feature of a landlord policy will provide temporary reimbursement for the rent money that you would otherwise receive if tenants were able to occupy the property.
Finally, we have liability protection. This is coverage for the medical or legal costs that might ensue if a tenant or visitor were to suffer and injury because of a property maintenance issue, just as it would if someone were to injure themselves at your home.
As with most lines of insurance, there are additional coverages that can be added to a landlord insurance policy, should you need them, but the three that we just covered are going to be what you should prioritize first.
The important thing to remember is that before you decide that you want to rent out your property, be sure to review your homeowner’s policy. Don’t just assume it will cover your home while you’re not living there. If you want to make sure that you are protecting your home while renting it out, landlord insurance is a must.