Insuring rental property is crucial for real estate investors and just as essential for lessees who own valuable goods that would cost thousands to replace. Both real estate investors and tenants can be sued for medical payments if someone is injured on their property, whether inside or outside. Sudden accidents such as high winds that shatter windows, plumbing problems that instigate water damage or burglaries that happen due to lax security measures affect not merely the landlord who has to repair the damaged building, but also the lessees whose property has been stolen or destroyed. Landlord insurance does not cover a lessee’s personal property.
Renters Insurance Coverage is Low-Priced Compared to Homeowners Insurance
Renters insurance affords lessees so much protection for so small an investment, it is wise to have it. In addition to covering the replacement cost or actual cash value of everything inside the rental residence, renters insurance offers liability coverage for guest injuries, property coverage away from home, plus living expenses when the renters cannot reside in their leased property during repairs.
While renters insurance usually is priced at between $15 and $35 a month, depending on the lessee’s property, optional coverage and deductible, renters can save by selecting renters insurance from the company that supplies their car or life insurance. Lower premiums usually come with higher deductibles, which in reality benefits lessees. Renters should use their insurance only for major losses, since every claim carries the potential for higher premium adjustments.
Tenants should document their goods diligently to ensure that they buy ample renters insurance, and maintain their receipts in a fireproof safe, in their automobiles or in another secure place away from home.
Landlords Require Insurance to Deal with Various Risks
Landlord insurance policies vary widely, from simple “named peril” policies to comprehensive or “all-risk” insurance policies. Since annually one out of every three landlords is sued, plenty of coverage is paramount. Whether coverage is restricted to specified risks or includes every risk not specifically excluded in the policy, landlord insurance applies to storm damage to the building and any of the landlord’s fixtures and appliances inside the units. Premiums depend on quite a few factors, from the building’s construction to its tenants, and optional coverage makes premiums increase but offers necessary protection.
Optional coverage can include shielding from loss of rents, landlord liability that covers legal defense expenses and medical payments, coverage for theft or vandalism, earthquake coverage, flood insurance and Replacement Cost coverage, which pays far more than an ordinary Actual Cash Value policy that subtracts depreciation. Landlords can reduce their premiums by accepting a higher deductible, not allowing pets or holding on to excellent lessees. The increase in lawsuits over toxic black mold has many insurers dropping mold coverage or making it an expensive option, which may still be essential if the leased property is older or located in one of the many states prone to mold.
Rental property owners should realize just what their policy covers, what it excludes, and how to file a claim. They also should take photos or videotape their property, take inventory of what they own inside the units, and maintain excellent records of tenant communications. Keeping the property clean and secure can prevent negligence lawsuits, so real estate investors should make important repairs immediately. Owners also should inform their insurance agent or their insurance company’s claims hotline as soon as a covered incident takes place.