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6 Insurance Policies Landlords Need

Becoming a landlord can seem like a no-brainer. Find the perfect renters, hire a property manager to deal with the nagging day-to-day tasks, and you find yourself in a sweet spot of passive income and few bumps in the journey.


Unfortunately, for homeowners and investors as of late, it’s become increasingly clear that owning a property is only a great investment so long as its fully protected. With many natural disasters in the news recently, proper insurance policies should be at the forefront of any investor’s mind.


And while landlord policies generally cost 25% more than a standard homeowners policy, they are crucial enough that your mortgage lender will usually require proof of a valid landlord insurance policy. However, landlords shouldn’t stop there. The right protection means finding an insurance policy that will cover property damage, liability, and lost rent if the property becomes uninhabitable.


To better understand the options available to landlords, check out this infographic that details the policy options to discuss with your provider.


Property Protection:


This is the most standard policy is often referred to as “dwelling coverage” by policy providers. It will provide coverage for damage to the home from fire, lightning, wind, hail, ice, snow, and other types of covered incidents. Remember, standard landlord policies typically do not cover flood damage, and in order to be covered in case of a flood, you will need to take out a separate flood insurance policy (see below).


Personal Property Protection:


Landlord policies cover personal property left on-site for maintenance or tenant use. This can include things like lawnmowers or appliances. Keep in mind, however, that while these kinds of policies will cover your belongings left on the property, they will not cover your renters’. To ensure that your tenants’ items have protection, you can require or advise your tenants to get a renters insurance policy.


Liability Protection:


If one of your tenants or a guest is injured on your property, liability protection can cover legal fees and medical expenses involved with the injury. This protection can be included in your landlord policy.


Rent Loss Protection:


Every landlord knows that nothing can kill an investment property like a vacancy. But if you are faced with a property that is damaged to the point of becoming uninhabitable, you can be faced that same rent loss issue. Rent loss insurance can be included in your landlord policy and helps you continue to make mortgage payments when a tenant cannot occupy the home by paying you the amount of money you would have made in rental income.


Flood Protection:


Flood insurance policies are run by the federal government through the National Flood Insurance Program (NFIP) and must be purchased in addition to your landlord insurance policy. Your insurance agent can help you purchase a flood insurance policy from NFIP and this can include coverage for not only the building but its contents and replacement costs.


Acts of Nature Protection:


Earthquakes, hurricanes, and tornadoes are acts of nature that are not always covered by your standard landlord insurance policy. Check with your provider to find out what your dwelling coverage will include. It may be limited to certain types of damage and exclude other types of peril. If your property is in an area at risk for earthquakes, hurricanes, or tornadoes, talk to your provider to add additional peril protections. These acts of protections can sometimes be referred to as nature protection or as “acts of God” by your policy prover.


Bonus: Cash Value vs. Replacement Cost


When speaking to your agent about designing your landlord insurance policy, it’s important to consider cash value versus replacement cost when you will be filing a claim.


An actual cost value policy will pay you the actual cost minus the depreciation value of the damage items when you need to repair or replace damaged property. This means, for example, if you purchased a new dishwasher 3 years ago (for $400), the insurer will depreciate the value of the washing machine to reflect its current value at 3 years old and pay you that amount. You will not receive the amount it would cost to buy a new dishwasher.

Replacement value, however, will get a new item at no out-of-pocket cost to you and will pay you the value equal to replacing the damaged item. Understandably, replacement cost coverage will cost more than actual cost coverage.


If you are willing to personally cover the difference out of pocket, an actual cost policy will be sufficient for your needs. But if you would rather insurance take care of everything, replacement cost coverage may be the better option.


There are certainly a lot of considerations when it comes to fully protecting your property as a landlord. To ensure that you are covered in any situation that may arise, it’s vital that you read over your policy carefully, and discuss any nuances about your coverage with your provider--hopefully, before you ever find yourself needing to make a claim.


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