Are You a Landlord? You Need Rental Property Insurance to Protect Your Investment

When you rent out your house, vacation home, or investment property, rental insurance (also known as landlord insurance) is an important protection against the financial risks associated with your renters. Your risk of liability and damage to your property increases when you enter into this business, and the cost of insurance increases depending on the level of coverage you purchase.

As such, you should know the advantages and disadvantages of acquiring it. Insurance coverage for rental properties varies, but generally, policies cover the housing structure and any additional structures on the property; certain contents of the rental property, like appliances and water heaters; liability coverage in the event of injury; and loss of rental income in the event of covered losses.

Here are the details.

What Property Insurance Can Do for You

Most landlord insurance policies cover loss of rental income when you are unable to rent the property if the property needs to be repaired or rebuilt after damage due to a covered loss. Renters also benefit from this type of insurance because it covers the cost of injuries that take place on the property.

Most rental property insurance policies do not include coverage for damage caused by natural disasters, and many owners waive it due to extra costs. However, you may need to purchase flood insurance, etc., to be covered for loss of income as a result of this type of damage. If you live in an area prone to this type of disaster, do your research.

Some insurance companies allow you to insure the property at a value that’s higher or lower than the replacement cost, regardless of its value. Regardless of how much coverage you choose, the insurance company will not pay you more than the value of the damage caused to the property by the event.

If you have a mortgage on your rental property, your lender may require landlord insurance. However, you could qualify for discounts because of it. Most policies protect you against losing the rent because of an event that causes property damage. If this happens, you want to supplement your insurance in the event of an event that renders the property unusable.

Basic Rental Property Insurance

A basic rental insurance policy provides for structural damage to the property and fair rental income in the event a renter moves due to covered losses, and if you are unable to collect the rent in time for the repair of the property. The property insurance should also include a loss clause that protects against a dispute and a fair rental income clause that protects you from a loss of income if your home becomes inhabitable.

Home contents insurance protects the owner of a house or building that rents out one or more units from financial losses as a result of damage to personal property used to maintain the unit, such as a lawnmower or other equipment. Home contents insurance does not cover the personal property of the renter or the owner, such as furniture or clothing.

Policies may offer additional, optional coverage for damage to your building or house caused by fire, accidents, vandalism, lightning, wind, hail, ice, snow, and other hazards. Loss-rent insurance, also known as loss-use insurance, helps to protect you if your property ceases being a profitable source of income as a result of damages or loss.

Tenants Should Obtain Renter’s Insurance

If your tenant or visitor is injured on your property and you are responsible for the injury, the property insurance can cover the legal and medical expenses associated with the injury if your policy up to its limits.

Some require tenants to take out renter’s insurance to protect themselves if their property is damaged or stolen. By requiring renter’s insurance, you can avoid liability claims if damage to their property is caused by a fire or other covered damage. To be covered, you must ask renters to take out their own rental insurance to protect their personal belongings.

But unlike rental policies that cover the building itself and the homeowner, renter’s insurance covers the personal property of renters and protects against certain types of injuries and damage to the property. You don’t have to insure the contents or personal belongings of your apartment, as this is the responsibility of your renter

There are many advantages and nearly no disadvantages to having rental property insurance on your rental property. It protects the property itself; it covers the medical expenses of individuals in the event of an injury, and it ensures the owner’s income in the event of a covered loss. It may never be used, but it’s always smart for a responsible owner or property manager to have rental property insurance.