When you own a home and live in it, you cover that home and its contents with a homeowner’s insurance policy. If you decide to turn that personal residence into a rental property, the homeowner’s insurance policy needs to be converted to a landlord policy. The coverage is a little different, and it’s absolutely essential to protect yourself against any financial troubles and legal liability.
For single family residences, you’ll need to obtain a dwelling policy. If your property is a condominium, you don’t necessarily need a new policy. In most cases, you can attach a rider to your existing policy. It’s usually called a “Rented to Others” clause. Landlord policies are different from homeowner’s policies in a few significant ways.
Cost and Coverage
You’ll be pleased to learn that most landlord insurance policies are cheaper than your homeowner’s insurance. This is because coverage is limited only to the physical structure and lost rent. There will not be coverage extended to any personal property inside the home or your tenant’s personal possessions. If your roof caves in during a rain storm and floods the home, the policy will cover the damage as well as the rent you lose when your home becomes inhabitable for tenants. But it doesn’t cover the replacement of your appliances or your tenant’s electronics.
Choosing All-Risk Insurance
You will have the option to purchase an all-risk policy or a stated risk policy. We always recommend the all-risk policy because the price doesn’t spike too high. You might have to pay an additional $100 annually for this policy, but it’s worth it. A stated risk policy only covers certain things, whereas an all-risk policy will take care of everything. You won’t have to worry whether your hardwood floors are covered when there’s water damage. Investing in a thorough policy makes more financial sense and often saves you money in the long term.
Increasing your liability coverage to include public liability insurance is also something we recommend. This will cover you for things that happen on your property that could put you in legal jeopardy. For example, if someone visiting your tenant gets hurt at your property and ends up in the hospital, your public liability insurance will cover the costs of that medical treatment and any legal claims that come with it. It’s not expensive; you can get public liability insurance added to your landlord insurance for between $25 and $50 a year, and it will usually cover up to $300,000 of expenses or claims.
Landlords with a lot of assets to protect will often increase their protection by purchasing a personal liability policy or a business liability policy. This increases the amount of coverage and prevents a potential claimant from going after any of your personal wealth.
It’s a good idea to talk to your insurance agent about the different options you have when it comes to landlord policies. You can also contact Hoffman Realty for more information.