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Landlord insurance guide

Landlord Insurance Guide

Financial experts around the world swear by the heaps of benefits if you choose to invest in income property. Income properties are money generating properties such as a rental apartment, condo, house or other commercial properties. If you are planning to invest in a rental property or you have an extra property that you are planning to rent out, one of the most important factors that you need to consider will be landlord insurance.

These days, platforms like Airbnb and VRBO make it so easy to turn your property into an income-generating one. Having landlord insurance will help you achieve peace of mind while your property is being used by your clients. Take note, your current homeowners insurance may not be enough if you plan to convert your home into an income generating property. Homeowners insurance will only provide coverage if the property is occupied by owners.

Defining Landlords Insurance

Landlord insurance is also known as buy-to-let insurance. It works similarly like a regular homeowners insurance which protects the property from damage to common perils. It also provides protection against liability in case there are injuries on the property. Landlord insurance coverage treats your property as a business.

Coverage of A Landlord Insurance

Different companies offer different insurance coverage. However, a landlords insurance will typically have three core coverages, these include:

Property Damage

In the event that your property gets damaged due to a covered peril, you will be compensated for the real estate and some furnishings inside. Some covered perils include fire, natural disaster, earthquake, vandalism, electrical or gas malfunction damage, and tenant damage. To provide better protection, you may need to consider getting replacement cost or replacement cost value (RCV), instead of the cheaper ACV or actual cash value, especially if you have older furnishings or fixtures in your property.

Liability Protection

This coverage will provide protection in case a tenant or visitor is injured while in your property. With liability protection, you do not have to worry about legal or medical costs that may otherwise be charged to you.

Lost Rental Income

Provides coverage should something happen to your property that it becomes uninhabitable (fire damage that requires extensive repairs, severe mold, severe termite damage,  sinkhole, etc.). You can get rental reimbursement to cover the loss of income if tenants cannot stay for the moment in your property.

In some cases, you may also notice your insurance agent mentioning specific packages like DP-1, DP-2, or DP-3. DP means Dwelling property and these are a type of insurance with different levels of coverage, with DP-1 allowing the most basic form of coverage and DP-3 having the widest range of protection.

Add-Ons

Depending on your insurance company, you may find several add-ons which you can combine with your standard landlord insurance. These add-ons may not be as crucial as the standard coverage but they can be extremely useful in specific events.

Flood Insurance

Just like most structure insurance, your landlord insurance policy will not cover you in case of flood damage. This includes any water damage due to municipal plumbing issues or natural disasters. So if your property is located in a flood-prone area, you may want to consider this add-on.

Guaranteed Income Insurance

This provides protection for landlords if a tenant cannot pay their rent for a month, or if they do not pay at all.

Emergency Protection

Running a rental property business is no easy feat so this emergency coverage will help provide protection for some emergency issues. For example, your tenant discovers a plumbing leak or found issues with the dishwasher. This add-on will help ensure that you are able to resolve small emergencies in your property.

Landlords Insurance vs Homeowners Insurance vs Renters Insurance

Homeowners insurance provides plenty of coverage including damage to the dwelling, personal items, liability, theft, fire, and more. However, while homeowners insurance may be extremely useful for your home, it will not cover any residence that you rent out. Additionally, the personal liability included in your homeowners insurance will not protect you in case your tenants or visitors of your tenants get injured while in the property.

Recently, the Insurance Information Institute shared that some insurance companies allow homeowners to extend their insurance to properties that are available for short term rental such as an Airbnb. However, if you are planning to do this, make sure to inform your insurance provider in advance.

If you are a renter and you want protection for your own property, you need to get a separate renters insurance. This is completely different to your landlord’s property insurance. For example, in case there is a fire, your landlord’s insurance will compensate them for the repair but your items will not be replaced, repaired, or paid for. So if you want to get protection for your personal items, make sure to secure them with a renters insurance.

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