The prospect of buying landlord insurance can seem quite daunting to those who are new to it – and it can be as equally as daunting to old hands too, but why? Because there is a lot more to it than your standard home insurance. When buying landlords-insurance you need to choose between one of two ways of claiming – you can claim the actual cash value, or a replacement value for items that are damaged. Both of these have their positive as well as negative aspects, so it can be difficult to decide which one is the best one for you.
If you decide to go with the actual cash value settlement on a landlord’s insurance policy, the premiums tend to be lower than with replacement values. The reason for this is that any compensation you will receive when making a claim will take in to account any deprecation of the current value, meaning that you may end up receiving less compensation than you first thought you would receive.
The premiums on replacement value landlords-insurance tend to be higher than those for cash value landlords-insurance, but if you make a claim you will receive compensation that will cover the cost of replacing any items as if they were brand new. With replacement value compensation you need to make sure that the rental property is kept in ‘a good condition’ otherwise the landlords-insurance policy is invalid. If you make a claim you also need to make sure that the item, be it a CD or the whole house, is replaced as if not you will receive the cash value compensation rather than replacement value compensation.
If you do decide to go with the higher premium replacement value landlords-insurance but are looking to reduce the policy costs, then you can increase the deductibles on your policy. In essence, deductibles are the same as excess on other insurance products, but increasing the excess or deductible your premiums go down.
