Landlords and property managers are responsible for ensuring that their building or home is safe, clean, and in good working order. But landlord insurance coverage can often be unclear to even the most experienced professionals.
That's why we’ve put together this guide on the types of policies you might want to consider as a landlord as well as some information about what they cover and how much they cost. This is your ultimate key to success as a landlord in 2021!
What’s Your Property Management Situation?
This post will walk you through the many different types of coverage considerations when it comes to landlord insurance. We’ll start by defining the different types of property managers and landlords you might be, to provide a base for cost considerations.
What It Comes Down To Is Your Situation…
You’re a Landlord: Your property is your “business” and you want to protect your investment. You handle all the day-to-day operations and aren’t worried about protecting against individual liability claims for injury or damage to your tenant(s).
You're a Tenant Manager: You're responsible for managing daily operations on behalf of a number of tenants, even though you are not the landlord. You might also do some emergency repairs, like changing the oil in your tenant's car when it won't start on cold days.
You're a Property Manager: You frequently handle the day-to-day operations on behalf of a number of landlords, including determining the day-to-day needs of your tenants. You also may be involved in some major repairs or emergency situations, which are not included in your regular maintenance duties.
You're an Individual Landlord: You don't have much involvement with managing your building or home, but you still want to have protection against potential claims from tenants who cause damage or injury to themselves or others on your property.
You're an Owner Agent: You’re the agent in charge of your property and tenant, but you don’t handle day-to-day operations or any repairs for your tenant. You might also work with multiple owners who all have tenants you manage on their behalf.
You're a Property Management Company: You manage properties on behalf of a number of different owners, including managing the day-to-day operations and repairs for each one. Your business provides management services rather than individual landlord insurance coverage to protect yourself from liability claims against you or your business as well as repair/maintenance issues that require your attention and cost money to fix.
You're a Realtor: You’re a representative of each of the other owners listed above, doing some repairs and managing the day-to-day operations on behalf of your tenant. The real estate company you work for takes care of your landlord insurance coverage for you since they represent all the owners as their agents.
You’re an Insurance Company: You represent a number of customers who want to lease their properties. They provide a variety of different insurance services, but you decide which ones they need and help them set up the right plan for their property.
Different Types of Tenants and Consequences for your liability coverage needs!
Single-Family Homes and Condos: These tend to be much smaller properties that are easier to manage (and insure!) when it comes to potential claims from tenants or guests than larger buildings like apartments or office spaces. But not every situation is the same, which we’ll cover more in-depth below!
Multi-Unit Properties: Because these are so large, they offer the best opportunity for potential claims to occur. That's why it’s important to have a very high deductible if you are the property manager for these multi-unit buildings!
Commercial Properties: Your number of potential claims and your level of liability protection will be affected by the size, value, and state of repair of your building when compared to others of the same type in your community.
Apartment Buildings (and Townhouses): These kinds of properties tend to have more incidents that require many repairs at once, such as tenants making holes in walls or breaking pipes to get hot water.
Single-Family Home Rentals: This type of tenant tends to be more relaxed than those in larger apartments and commercial structures, but they might still have the potential to cause minor damage and injury while they are living in your property.
Seasonal Rentals: These properties tend to be rented by guests who are much more responsible since you know who they are and have their information before allowing them on your property! But it’s still important to have appropriate liability insurance coverage for these kinds of tenants just in case something does happen.
Hosts of Special Events: These are usually managed by property managers, but it’s still important to choose a plan that allows you to protect yourself against special events like concerts and festivals where a larger number of people might be staying on your property.
Homeowners as Clients: These clients will generally have different insurance needs than other types of tenants listed above. They might need additional liability coverage, for example, and will need to pay additional premiums for that level of protection.
Businesses and Contractors Using Your Property: The potential for claims against you increases significantly when owners of these businesses use your property! However, most of them will have their own coverage that will protect them from damage or injury their business does to your property as well as the potential loss of property or data.
Tenants' Guests: This is the area where you might feel most nervous about protecting yourself from legal claims. You want to make sure your policy covers any situation in which a tenant’s guest causes damage or injury to themselves, other tenants, or their guests while they are on your property!
Tenants' Pets: Even though pets don’t have any legal rights when they’re living in a property, they still could cause damage to themselves or damage to the building if they get out of control.
Tenants' Employees: This is the one situation where you want to make sure there isn't a physical connection between the employee and your tenant. That usually means your coverage should be just for accidents that happen to the employer or contractor when on your property, not for anyone else who works for them!
The Basic Requirements of Landlord Insurance Coverage
Liability Insurance (Formally known as "Contents"): This coverage reimburses you for any money lost by someone else when they are on your property, such as people who are injured or their belongings that are damaged or stolen.
Personal Property: This coverage reimburses you when someone's item gets damaged or lost while they're living on your property! It also covers things like jewelry, furs, and other high-value products that might get damaged or stolen from your property.
Permanent Improvements: You might need to replace water heaters, electrical systems, and appliances that are damaged or destroyed by a tenant’s guest or other claims. Depending on what needs to be done, your coverage may include a deductible for the expense of repairing or replacing these items.
Endorsements for Special Needs: If you have certain sensitive areas on your property where you need better liability protection (such as near an elevator, water supplies, escalators, or handicapped access), there are endorsement levels that will give you that extra level of coverage.
Earthquake Proofing (And Other Special Needs): If your location is at risk of a major earthquake, you’ll need an endorsement for the safety of your property and employees.
Commercial Units: Be sure to get liability coverage that covers commercial units as well as individual residential properties to handle any potential claims from commercial tenants in large buildings.
5 tips to keep in mind while seeking landlord insurance-
When it comes to landlord insurance, there are a few things you should first consider before selecting your policy. Here are five important tips to keep in mind while seeking landlord insurance:
How Much Should I Pay? You may have been under the impression that a general liability policy covers 100% of your losses, but this is not always true. If you just happen to be the person who causes a loss for your landlord, then you will probably not be covered. Therefore, you must determine the extent of coverage you need. This can be achieved by finding out how much your landlord's insurance coverage is and multiplying it with an estimate of how much damage would occur in a situation involving large amounts of damage.
What Does My Policy Cover? Even if your policy covers 100% of the losses, it does not mean that you will be fully reimbursed for all of the damages. Most landlords will require you to fix their property before reimbursing them, and some landlords do not have insurance because they know that their tenants are generally responsible for preventing damage to their property. Listed below are three basic examples of what your policy should cover:
Pest control – If a pest infestation occurs (such as cockroaches or bedbugs), then your landlord should be required to pay the cost of any service that must be used to destroy these pests.
Repairs – In the event that the property is damaged as a result of your negligence, then your landlord's insurance should cover all repairs.
Monthly rent payments – In the event that you have to move out as a result of being unable to live in an uninhabitable property due to damages caused by you, then the monthly rent payments should still be fully covered by your landlord's insurance policy.
- What Are My Deductibles? Another important thing to consider when seeking landlord insurance is what type of deductibles are included in your policy. Most policies have a "per occurrence" deductible, which means that any losses that involve multiple items will only be listed under one claim. For example, if your property is damaged by both a fire and a flood, then you would only have to pay the deductible once for all of the damages. This rule is also applied to "catastrophic" events, which are defined as those that involve losses in excess of $100,000.
On the other hand, there are also policies that have separate deductibles for each situation unique to the policyholder. These policies will generally cost more than those that include one deductible. But when it comes to having peace of mind while living in your rental property, you should consider how much it would cost if your apartment complex had to be completely rebuilt due to one of these disasters taking place.
Where Can I Find Landlord Insurance? You have probably already realized that not all insurance companies provide landlord insurance. What you might not know is that some banks and credit unions are then able to provide this type of coverage, as long as you are renting through them. Therefore, you simply need to find out if your bank or credit union offers this type of policy. You may also be able to find information on landlord insurance through the government by carrying out a simple search online or by talking with a licensed agent in your area.
Will My Policy Cover My Property? Another important thing to always consider is whether or not your landlord's insurance will cover your rental property. It may seem obvious, but you should verify this before even writing a check for the premium payment. This can be done by speaking with a licensed agent in your area or by simply reading the small print on your policy.
You may find that it is very important to be sure of what type of policy you are buying. In this article, we have only listed some of the basic aspects you must consider when purchasing landlord insurance; there are many other factors that should also be looked into and thought through before making any purchases.
For more information, you can visit Real Estate Calculators.
