How to Properly Insure Your Rental PropertyJuly 20, 2017
Whether you are renting out your old home until you sell it or you own a large multi-unit rental property, it’s important that you are properly insured. If you are not, both you and your renters may get in trouble if anything happens.
Storms, slips and falls, and even equipment troubles can really mess up your bottom line if you are not prepared. Just one big payment to take care of any problems could really hurt you, especially if you can’t have renters for a while.
This is why you need to be ready with the right insurance!
So, What Type of Insurance Will You Need?
If your home has a rental unit, it may be covered under your personal homeowner’s policy. However, make sure that you read the fine print to make sure that your rental property is, in fact, included.
If you have a separate rental property, there are several policies worth considering. The basic one, often called DP-1, covers the regular things such as fires and vandalism. The next step up, DP-2, would be a policy that covers storm damage, including hail damage and vandalism. There are times when this policy will cover collision in case a car hits your rental property.
The best policy that you could get would be an open peril policy (or DP-3), which covers pretty much everything unless it is specifically excluded in your plan. While you are covered with the basic insurance, the open peril policy will replace things at your cost. This will protect you much better than other policies.
Other Types of Coverage to Consider
You may also want to consider landlord protective policies, which cover any equipment that may break down. This can be a real life-saver if, for example, the furnace breaks down (or any other piece of large equipment).
Loss of rental income can also be covered. You may want to consider this if you have a multi-residential property. This will cover the loss of income if repairs need to be made and your units have to be left empty for an extended period of time. However, this will not cover times between renters.
No matter what insurance policy you have, make sure that you have liability coverage—and enough of it. This will help if you are ever sued. Especially with bigger apartment complexes, people are likely to fall or slip on the sidewalk. This insurance covers these claims.
Liability insurance comes in different forms, depending on how much you may need. A smaller property will need less coverage than a large property with pools, sidewalks, and even a gym.
You may need more if your property is in a high-crime area. However, you shouldn’t worry about this insurance. For only a few hundred dollars more a year, you may be able to have one million dollars in coverage.
How Much Coverage Do You Need?
It is important that you get as much insurance as you can afford. The more insurance that you have, the more likely your rental property will be safe no matter what happens. Though the basic plan is often enough for most rental properties, if something terrible happened, wouldn’t you rather be thoroughly protected?
No matter how much insurance you have, you should always make sure that you talk to your renters about protecting themselves as well. Renter’s insurance on their part is important to protect their personal property within the space they are renting.
Be sure to discuss your insurance policy with a professional. They will ensure that your rental venture is a success, even if there is an unforeseen disaster down the line. They may be able to tweak your homeowner’s insurance, though they will be able to go over your multiple options so that you can rest assured that you have exactly what you need and want.