Many people turn to real estate which is purchasing rental properties to increase their assets and wealth. Owning investment property makes you a business owner. Every business needs to protect its assets and reduce the owners from personal risk. This is done with the purchase of landlord insurance.
Landlord insurance is very similar to homeowners insurance in many ways. However, it expands the coverage to protect the owners and the assets of business. Your landlord insurance policy will cover your property for damage. Should your building be destroyed or damaged from fire, your insurance covers rebuilding it. It is important to work with your licensed insurance professional to determine the proper amount of coverage.
Get an estimate from a contractor or two, do the work to determine the real cost associated with rebuilding. Underinsuring can cause headaches and you holding the bag to pay the difference if the coverage is not adequate. In some cases, enough to cause very serious financial hardship which could include foreclosure or even bankruptcy. Consider what is excluded and make sure to ask about flood protection, lightning, wind, and other types of natural disasters.
Every carrier and policy is different, read the coverage carefully and make sure you understand what is covered and what is not.
A landlord insurance policy will typically carry a loss income provision. Check to make sure your policy includes lost rental income. In the event of a fire or loss, the lost rental income will reimburse you during the rebuilding phase. If you depend on the rental income, make sure your landlord policy covers this provision. This is a huge difference from a typical home owner’s policy.
A landlord insurance policy also will normally carry liability protection as well. In the event a tenant or third party is injured or sues you, this coverage will protect you as the landlord. Your landlord insurance will cover legal and court costs and pay out in the event of a judgment. Review the liability coverage in detail with your licensed insurance professional.
It’s also important to remember that your tenant’s belongings are not covered by your landlord insurance policy, only yours as limited by the policy. Many landlords require tenants to carry their own insurance before renting to them.
Make sure your properly covered and review the landlord insurance on a regular basis with your licensed insurance professional.
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