Owning a rental property is like owning a business and brings with it certain risks. The first, and cheapest, line of defense in protecting yourself with a rental is a good landlord policy which covers property damage, as well as liability. Most insurance companies offer landlord policies, although they differ in many ways. We encourage you to contact your insurance professional for more details regarding this topic.
Liability coverage is a standard offering in most policies. It helps pay for your expenses if you're found legally responsible after someone is injured on your property or if you are required to pay for damage done to someone else's property.
Your homeowner's insurance policy likely won't cover a home that you rent out. Landlord insurance typically provides coverage for the structure of the home and also includes liability coverage that may help prevent you from paying out of pocket if you are found at fault in certain situations.
If you have a mortgage on the home you're renting to tenants, you may find that your lender requires you to have landlord insurance.
Tenant injuries, for instance, maybe a concern for landlords. Let's say a loose handrail causes a tenant to fall. You could be held responsible for resulting injuries, according to the Insurance Journal, if you were found negligent in maintaining the property — or even if you just failed to warn the tenant of a potential safety risk.
If that were to happen, your landlord liability coverage would likely kick in to help pay your legal defense and help cover court judgments made against you, up to the limits stated in your policy.
Other situations could also expose you to liability, according to the Insurance Journal. If you fail to provide proper security for your tenants, for instance, or if your tenant engages in unlawful behavior and you fail to take measures to stop it, you could be held liable. Landlord liability coverage can usually help protect you in these and other similar scenarios, up to the limit that's set in your policy.
Having a landlord insurance policy with liability coverage can go a long way toward giving you the peace of mind that comes with knowing you have a safety net in place, just in case.
Why Is Landlord Insurance So Important?
Dwelling Coverage: This is the part of the policy that covers the building.
Several things to take into consideration-Is it a comprehensive policy covering all types of claims (fire, water, wind, lightning, etc.) or just a basic policy covering only a few? Is it a replacement cost policy providing coverage to replace your home or a CASH VALUE policy that would depreciate everything based on age?
Liability Coverage: Covers you in the event if you are sued. If you own numerous properties, you should consider purchasing a very inexpensive Liability Umbrella.
Medical Payments Coverage: Offers small amounts of coverage ($1000-$5000) to cover medical bills resulting from injuries that occur on your property.
Loss of Rents Coverage: Loss of rent coverage reimburses you for lost rent due to the home being unlivable because of a covered claim.
Personal Property or Contents Coverage: Contents coverage for the Landlord's "stuff" (appliances, furnishings, etc). This coverage will not cover the tenant's belongings. A tenant should have their own renter's insurance policy.
MYTHS OF LANDLORD INSURANCE
"My Homeowners Insurance Is Sufficient" Homeowner's Insurance won't usually cover claims that are filed if the house is "non-owner" occupied. If it is a permanent rental, a change in policy type will be required.
"Landlord Insurance Is Too Expensive" In most cases Landlord Insurance and Home Insurance rates are similar. The difference is what is covered.
Sample language to send to your Insurance Company/Agent:
"Dear Agent,
I have asked Your Property Management Company's Firm Name to manage my property as a rental, which is insured with your company. My management agreement with Your Property Management Company's Firm Name requires that they be added to my insurance policy as an Additional Insured for the purposes of liability. Please add Your Property Management Company's Firm Name as Additional Insured to my policy on the above-mentioned property. It is my understanding that there is no additional cost for this endorsement. If there is a charge, please contact us before making any changes. Mail the endorsement directly to Your Property Management Company's Firm Name. at Your Property Management Company's Firm Mailing Address, or scan and email to xxxxxx@xxxxxx.com"
At PGMG, we require all owners to obtain Landlord Insurance and have PGMG as additionally insured.
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