In a previous post we reviewed renters insurance and the benefits for maintaining it when you are a tenant. In this article we will cover insurance for the property owner of a rental property commonly referred to as a Rental Owner Policy or a Landlord Policy, there may be other names used by different insurance carrriers however these are the two names we have seen most frequently.
Lets cover some of the basic components of a Landlord Policy. For the purpose of this article we are going over a general landlord policy. We will go over other policies in future aritcles, such as a Condo Owner Policy or insurance coverage for apartment complexes.
Key Components - Parts of the Insurance Contract
Declarations- identifies who is an insured, the insured's address, the insuring company, what risks or property are covered, the policy limits (amount of insurance), any applicable deductibles, the policy period and premium amount. These are usually provided on a form that is filled out by the insurer based on the insured's application and attached on top of or inserted within the first few pages of the standard policy form.
Dwelling - This is the component that covers the main structure on the property.
Issues to Consider
Underestimating Rebuild Costs -One of the major issues we have seen in the past is that we have seen insufficent coverage for the dwelling. This can occur for a number of reasons, one being the increases in the cost of construction have at times been higher than the cost to purchase which had been especially true during the last recession we experianced. Many homeowners insured for what they had purchased the property without factoring in the cost of construction. The same holds true if there is custom work that has been done on the property.
Other Structures - Sheds, Barns, structures that are not considered part of the "dwelling"
Issues to Consider
If you have a elaborate guest house, Casita or something more exotic. You may want to look into increasing your coverage for other structures.
Contents - Typically this number is a lot lower than you will have for your primary residence or the house you live in. The reason being tenants have their own insurance that covers their personal possessions as previously discusssed in the blog entry regarding renters insurance.
Items to Consider
This may change for example for different circumstancees like furnished properties, corporate rentals or vacation properties that may have a large amount of property that is owned by the property owner.
Fair Rental Value - This may cost additional and may not be avalable in all insurance policies but there is policies that guarantee the loss in rent when your property can no longer be rented due to an insurance covered issue.
Items to Consider- You may consider a few items when deciding on adding this to your coverage. Items such as the age of the property, material type of the plumbing, number of bathrooms in the property and a number of items that could contribute to habitability issues and loss of rent should be considered.
Liability Coverage - This is the total coverage that is provided in liability issues. If a injury or death occured to your tenant due to items caused by the property, this coverage would be used to handle the potential costs.
Exclusions - take coverage away from the Insuring Agreement by describing property, perils, hazards or losses arising from specific causes which are not covered by the policy.