What are the LANDLORD insurance requirements?

What Is Landlord Liability Insurance?

Landlord insurance provides coverage for property owners renting out one or more residential homes, apartments, or condos. As a landlord, you need protection from financial loss that may result from damages to a rental property due to fire, break-in, severe weather and more. You can get insurance to help cover loss of income in the event that your rental units become uninhabitable due to circumstances beyond your control.

To get information, advice, and to find the right coverage to match your needs, contact an Insurance Agent. A Agent can guide you in the right direction with free insurance quotes from several different insurance companies and help you find the landlord insurance plan that makes the most sense for you.

What Does Landlord Insurance Cover?

Landlord insurance provides several important types of coverage. Depending on the insurance company you work with and the options you choose, your policy may consist of some or all of these types of insurance:

Property damage: This covers damage to your buildings and personal property due to fire, storm damage, theft, vandalism and tenant damage. Ideally, your landlord insurance will cover the replacement costs for your entire rental property in the event of a total loss.

Liability insurance: This coverage protects you against liability claims and lawsuits. Whether a tenant, visitor or even a trespasser is injured on your rental property, you could find yourself in a legal mess. Your liability insurance will help you cover the costs associated with bodily injury claims on your property. These costs can include medical payments, funeral costs, legal fees and judgment or settlement costs. You will also be covered if you, as the landlord, are found responsible for another person’s property damage. For example, if you neglect to fix a leaking water pipe and mold damage destroys a tenant’s expensive collection of vintage albums, a liability claim can be filed against you by the tenant.

Loss of income: This insurance will help compensate you for lost income in the event that a rental property becomes uninhabitable due to a covered loss, such as a storm or apartment fire. Your loss of income coverage, or “rental reimbursement,” will prevent you from losing the income you would have had if you were collecting rent.

Optional coverage: As a landlord, you can buy additional coverage, such as rent guarantee insurance, natural disaster insurance, employer liability insurance and landlord contents insurance to cover your personal property items such as furnishings or carpet in the rental property. Contact an Insurance Agent for complete information on the types of coverage available.

How Does Landlord Insurance Work?

Landlord insurance protects you from damage to your property and from liability claims. Let’s look at a few examples of how landlord insurance works.

Rental property damage example: In the event that a lightning strike starts an apartment fire that causes substantial damage, your landlord insurance can help pay for the repairs or rebuilding.  Your property damage coverage has limits – be sure you are aware of what they are, and remember that you will need to pay a deductible before you’ll get any reimbursement from your insurer. If you have loss of income coverage, you can be compensated for the rental income you will lose during repairs.

Note that landlord property damage insurance sometimes pays for tenant damage, and sometimes it will not. Taking a rental deposit at the time your tenant signs a lease is a good idea. You can also ask your agent if you can add coverage for tenant damage.

Landlord liability example: Let’s say a visitor comes to your apartment complex and is injured in a fall. If that visitor fell because he tripped over his own shoelaces, you shouldn’t have a liability claim on your hands. If the visitor is staying with one of your tenants and falls in the shower, you also will likely not be held responsible. That incident would potentially fall under the renter’s liability insurance.

However, if the visitor tripped due to negligence on your part, such as icy walkways around your building or broken steps on a stairway, you may have a liability claim on your hands. In this case, the visitor could file a claim against your insurance policy to cover the costs of medical care. If the injury is severe or the negligence considered egregious, the visitor may file a lawsuit against you. Your landlord insurance can cover your costs up to the limits on your policy, after your deductible amount is paid.

Do I Have to Have Landlord Insurance?

Landlord insurance is not required by law, but it is a requirement if RPM is to manage the property.  Regardless of who manages the property though, you would be wise to carry it if you’re collecting rent and managing a property.  Building fires, tropical storms, tornadoes, vandalism and liability claims are some of the key things you want to be prepared for as a landlord. If your property experiences $100,000 worth of damage and you do not have insurance to cover it, those costs must come out of your pocket.

You need landlord insurance when you do not occupy the same residence as your tenant. You will also need landlord insurance if you are renting out your own home temporarily or sharing accommodations, such as your basement level, with a renter.

Some landlords rely on their homeowners insurance to cover their rental units. It is important to know that your homeowners policy most likely will not cover damage to your rental property, unless you are only renting out a portion of the home you are living in. It will also likely not provide coverage for liability claims.

Why Is Landlord Insurance Important?

Landlord insurance is important because it protects you from financial loss resulting from accidents, natural disasters, injuries and other liability issues associated with your rental property. It also provides reimbursement for loss of rental income and can cover any repairs or even the entire replacement of a rental property structure.

How Much Is Landlord Insurance?

The cost of landlord insurance can vary considerably based on a number of factors. You may see rates as low as $500 per year for a small rental unit, or several thousands of dollars per year for a larger unit with a swimming pool. If you rent out a house that you eventually plan to sell, you may pay about 25% more for your landlord insurance than you were paying for homeowners insurance.

Some of the factors that will affect your premium costs include:

• Your geographic location and any known risks in the area

• The size of the structure

• How many rental units you have

• The age and condition of the building

• Whether your electrical wiring is up to current code

• Whether you allow smokers to rent from you

• Whether your complex has a swimming pool

• The type and amount of coverage you are purchasing

• Whether you have fire sprinklers installed in your rental units

• Whether the complex has gated access

• Whether you have burglar alarms

Your best bet for the landlord insurance policy you need is work with an Insurance Agent you trust.  An Agent can compare prices for you, explain the insurance coverage options available, and look for landlord insurance discounts you may qualify for to make your coverage affordable.

Is Landlord Insurance Tax Deductible?

Yes, you can deduct landlord insurance premiums you pay on your rental property, including any landlord insurance policies on the building, contents and liability. Because being a landlord is a business endeavor, your landlord insurance can be considered a business expense.

Can Landlords Require Renters Insurance?

Although there is no federal or state law requiring tenants to have renters insurance, as a landlord it is fully within your legal rights to require this as part of the rental agreement. Stipulated in a rental agreement, this requirement must apply to every tenant. A landlord can also require that a tenant have a specific amount of insurance, provide proof of coverage and require that the tenant maintain the policy for the duration of a lease.

Where Can I Get Landlord Insurance?

The best way to purchase landlord insurance is through an Insurance Agent.  Agents can compare quotes and options from for you and customize your coverage to meet your needs.

Landlord insurance is vital if you own a rental property. It protects you from expensive damage to your property due to accidents and natural disasters, and loss of rental income.

Contact an Insurance Agent right now so you can get personalized assistance to find the coverage you need.

Balancing Risk and Deductibles 

The benefit of insurance is to transfer the risk of loss to a company in exchange for a premium. The deductible is an amount the insured pays out of pocket before the insurance starts covering the cost of the loss. The challenge is to balance the risk an insured can accept with the premium being charged.

To manage insurance premiums, policy holders often consider adjusting their deductibles. Lower deductibles result in less money out of pocket if a loss occurs in return for higher premiums. Higher deductibles will lower premiums but require that the insured bear a larger amount of the first part of the loss.

Insurance companies offer deductibles as a specific dollar amount or as a percentage of the total amount of insurance policy. The amount is usually shown on the declaration page of homeowner and auto policies.

A small fire in a $300,000 home that resulted in $5,000 of damage might not be covered because it is less than the 2% deductible which would be $6,000. If the homeowner can afford the cost of repairs in exchange for lower premiums, it might be worth it. On the other hand, if that loss would be difficult for the homeowner, a change in the deductible for higher premiums could be considered.

Raising deductibles can save money in the present when paying the premium but could cause problems later if a claim occurs. Homeowners should review deductibles with their property insurance agent to be familiar with the amounts and make any changes that would be appropriate.

ADDITIONAL RESOURCES

• Allstate Article: What is Landlord Liability Insurance?

BELOW ARTICLE SOURCE https://www.uphelp.org/pubs/insurance-check-landlords-and-property-owners 

Insurance Check-Up for Landlords and Property Owners

If you haven’t checked your policies lately to make sure you’ve got what you need, you may be wasting a lot of money paying for insurance. Just because your premium goes up every year doesn’t mean your coverage does too. Your coverage may be out dated and there may be new exclusions for important things like water damage in the current version of your policy. And, if you have a low deductible, you’re probably overpaying. Spending even a half hour on the phone with your insurance company asking a few simple questions and keeping notes from the conversation in a safe place will make you and your property a whole lot safer. In an ideal world, you could be confident that your insurer, agent or broker was taking care of all your needs for a fair price, but we live in this world.

After a fire or other disaster, you’ll want to repair/rebuild as quickly as possible so tenants can return to their units and keep paying rent. Insurance will be your main source of money to fund the work and recoup lost rental income. Here’s how to make sure you are fully protected:

Questions to ask:

 1. Are my Property Coverage limits A, B and C high enough for today’s prices?

The dollar amount limit of your “A” (Buildings) coverage should be as close as possible to what it would cost to repair or rebuild the structure(s) in the event of a total loss. Here are some of the ways you can check if this number is right:

 • Get a specific commitment from your insurance company to calculate it for you. Ask them to send a professional replacement cost estimator out to your property.

• Pay a company like Castle Inspection Service to do it for you.

• Get a local contractor to come out and estimate the replacement cost of your property.

The limit of your “B” (Business Personal Property) should be enough to replace all removable items on the premises that you own: washers and dryers, refrigerators, window drapes, trashcans and business equipment. The limit of your “C” (Loss of Income) coverage should be enough to replace the income you would lose if your building became uninhabitable during the recovery period after a total loss.

2. Does my policy have a “co-insurance” clause and if so what is it?

Co-insurance is a penalty provision built into some commercial policies. The penalty is applied against you if you have a loss and your insurance limits are too low to cover it. Your best bet is to buy a policy without a co-insurance clause, but if you have one, keep you limits up to date to avoid the penalty in the event of a claim.

3. Is my liability coverage enough and do I need an Umbrella?

Liability coverage is your protection against a lawsuit if someone gets injured on your property and files a claim (lawsuit) against you. How much coverage you need depends on your personal assets, your property’s features, how many tenants you have, and whether they have renters insurance. If someone is injured in an apartment on premises you own, rarely do they only sue the potentially responsible tenant. You, as the property owner, almost always get sued too. Commercial umbrella insurance gives you extra coverage and is especially worthwhile if you own more than one property.

4. Has my policy changed in regards to water damage?

Your insurance policy may only cover certain kinds of water damage. Over the years, water damage coverage has changed quite a bit. Find out what you are covered for in regards to water damage.

Insurance extras that are definitely worth the cost:

Extra or Extended Replacement Cost coverage: Most insurance companies give you the option of buying extra replacement cost. This provides you with a cushion against inflation & increased costs of labor and building materials over time. This additional coverage is fairly inexpensive to add.

Building Code Upgrade/Code Compliance: The building codes in your area may change almost every year. Making sure your policy has an extra provision for building code upgrades will make sure that you have enough money to repair and rebuild your building to today’s building codes.

Insurance extras that you must consider adding:

Earthquake Insurance: Your standard property insurance policy does not cover any damage caused by earthquakes. To protect your property we recommend buying earthquake insurance AND retrofitting your building. Get an estimate for both and remember doing at least something is better than doing nothing at all.

Flood Insurance: If your building is near any body of water, it is wise to get a quote for flood insurance. Flood insurance will protect your property from any damage to your home caused by outside sources of water. If you live near a hill, flood insurance will protect you from any mudslides or earth movement that is excluded in your homeowners policy.

What you can do to NOW to be better prepared:

Require or Strongly Recommend Renters Insurance to Tenants: Your lease agreement can require or strongly recommend that your tenants buy renters insurance. Your property insurance will not cover any of your tenant’s belongings. Make sure your tenants know this. Renters insurance and earthquake insurance are fairly cheap for renters and as a landlord you will benefit from their liability coverage.

Hot Tip: Offer a discount on their rent if they name you as an additional insured.

Keep Good Rental Records: If your building has been damaged, and your tenants have to move out, your insurance company will pay you for “Loss of Rent.” Keeping good rental records and copies of your rental agreements will ensure you get paid. Remember to keep records for vacant units too. Even if no one is renting a unit, if it is rentable shape, it is considered “Held for Rent” and you can claim “Loss of Rent.”

Maintain Your Property: By maintaining your building’s smoke alarms, fire extinguishers, fire escapes, elevators and fire systems you are protecting your property and your income. You may be entitled to discounts for these efforts. Keep records of this maintenance offsite.

To make sure your policy includes the above items, read your insurance policy, or call your insurance agent and ask. Keep notes on your conversation is a safe place, like your email. Making sure you have the right kind and right amount of insurance is a vital part to recovering from a natural disaster or fire. Protect your assets and your income today.