As a rental property owner, it’s imperative you have proper insurance in place to protect you and your assets. The two types of insurance coverage you need are a Landlord’s Policy and an Umbrella Policy. This blog gives a brief overview of the provided coverage in each and explains why they’re vital for landlords to have.
1. Landlord’s Policies cover the landlord’s liability as well as the property itself and missing rent if something happens to the property. For example, if your property catches on fire and sits vacant for 6 months before it’s habitable again, the insurance company pays loss of rent to the landlord. Two important questions to ask your insurance provider when getting a Landlords’ Policy set up are:
a. How long is loss of rent covered in this policy?
b. Is there a lapse in coverage if the property sits vacant and if so, what’s the timeframe?
This is important to know as some policies terminate if the property sits vacant for too long. We recently had a real estate investor who had fire damage to his rental home and had trouble collecting from the insurance company because of this.
2. Umbrella Policies offer protection to investors when faced with worst-case scenarios. If you as a landlord find yourself dealing with a claim that exceeds your landlord’s policy, the umbrella policy kicks in to cover the excess dollar amount. We recommend a $2 million policy, but at very minimum a $500,000 policy. While all investors hope they never need it, tis additional coverage can be a saving grace if they ever find themselves in an emergency situation.
QUESTION: If I decide to rent my primary residence as a rental property, do I need a different insurance policy?
ANSWER: Yes. It’s a simple call to your insurance provider to convert your policy from a homeowners policy to a landlord’s policy.
