Whether you are an owner with a portfolio of rental properties or just one property, a common thread shared by both types of owners is that rental properties are an investment that must be protected. However, according to the Residential Leasing Agents Association, homeowners often overlook one key protection, that of adequate insurance coverage. Standard homeowners insurance does not cover a renter-occupied property, so homeowners insurance is required for effective protection.
Homeowners insurance, also known as rental property insurance, covers a number of different things and you can choose the type of policy that best suits your particular needs. However, keep in mind that when deciding what particular coverage you want your insurance to contain, such as construction or construction and contents coverage, legal expense protection, it is crucial not to be left with underinsurance as you do not want to be left in a situation of having to pay thousands of dollars out of pocket for an investment that is supposed to make you money, not cost you money. Also keep in mind that the level of coverage you can receive and how much the policy costs will be determined by the insurer depending on factors such as the type of tenant renting your property, with high-risk renters such as students being viewed less favorable. than professional followers.
Construction coverage is almost certainly the minimum insurance protection you have on your own home, and it’s just as important to have for a rental property. This will protect the building from physical damage as a result of a fire, burst pipe, or other accidental catastrophe, saving you from having to bear the full cost of the repair and reconstruction work that needs to be done. Many insurance providers will also offer the option of coverage against malicious damage caused by tenants, and also an additional option that will compensate a fixed percentage of rent loss while the property is uninhabitable.
Even if you are renting an unfurnished property, it will still contain contents that are your responsibility, so it may be worth including contents coverage in the rental insurance policy you obtain. Limited contents coverage will not only compensate you up to a predetermined amount for the loss of or damage to accessories that belong to you, such as kitchen appliances, drapes, and rugs, but many policies can also include liability coverage in the event that a tenant claims an injury from an accident. faulty installation that is considered the owner’s obligation to maintain, for example, a fall caused by loose carpeting or burns caused by a faulty stove. For furnished properties, where the cost of replacing damaged contents is higher than simply replacing built-ins, full contents coverage may be available.
Another crucial aspect of homeowners insurance is rental protection. Chances are, you have money tied up in your rental property, a mortgage payment to make, for which you depend on receiving regular monthly checks from your tenant. Unfortunately, in the rental housing market, tenant reliability is not a guarantee, whether due to sheer irresponsibility on the part of the tenants or a genuine inability to pay, such as if the tenant has recently lost their job and is struggling to make ends meet. meet monthly payments. Payments Rent guarantee insurance will ensure that you keep money coming in every month for a pre-determined period, so if you can’t afford to lose that monthly income if your tenant stops paying, having rent protection will give you great peace of mind .
Since homeowners are at risk of expensive legal fees, it is advisable to include legal expenses insurance in your policy. If you are forced to pay attorney fees to deal with tenants who don’t pay rent or file a claim against you, or court costs for an eviction hearing, the cost will add up quickly, so no doubt it is in the owner’s best interest to be covered for such situations.
Another useful benefit of homeowners insurance is emergency assistance, which will provide compensation in the event service people are called to the property, for example, if there is an electrical, gas, or plumbing problem that is not the result of a lack of maintenance. Most policies will cover parts and labor costs, saving you the expense and hassle of fixing the problem yourself.
Remember, tenants do not own the home they live in, and as such, you cannot trust them to treat your property with the same care and respect that you would if you lived in it. It’s up to you to defend yourself and your property against the inherent risks of homeownership, and an important way to do this is to avoid taking shortcuts when it comes to obtaining adequate insurance coverage.