Insurance, Insurance, Insurance! If you’ve been around a while, you are probably sick of hearing me talk about insurance and proper coverage.
If you’re new here, welcome to the annual insurance service announcement.
All joking aside this is a very important topic and I wholeheartedly believe in talking about it at least once a year.
"Why", you might ask. I never want an accident to happen and a client of mine, to say, “no one ever told me about this coverage”.
In 2022, we had two house fires and a condo that flooded. In 2023, we had a condo catch fire. Things happen and you don’t know when they are going to happen.
In addition to Primary Liability Coverage, there are four essential elements that all Landlord Insurance policies should include. These elements are Malicious Intent, Fire, Loss of Rents, and Vandalism.
Malicious Intent happens when the resident renting your home, intentionally damages the property above and beyond “normal wear and tear.” We are talking destroys the carpet to the point it must be replaced, holes in the wall, overall filth, piles of debris left behind, and more. While we don’t see these things very often, we do see them. So when it does happen, landlords are left scrambling to secure the funds to bring the property back to a rentable condition. This scenario is precisely why it’s important to ensure you have Malicious Intent in your policy. Equally important is ensuring the resident has Renter’s Insurance so you can recoup the cost from their policy and not affect your premiums. YES, this coverage enables you to sleep at night. The best part is most insurance companies don’t charge extra for this coverage.
Your fire policy will rebuild part or all of your rental home only, so this is pretty straightforward. Just make sure each year that you increase the replacement cost of the rental home. In the last 2 years, building materials went up 39.2%. Most insurance companies will not adjust for inflation.
Loss of Use
Now, let's start thinking like an investor; you are all investors if you own a rental property. Your business is to make money with an investment/rental property! But what happens if the property burns down, which happens, or the resident causes so much damage to the house that it will take six months to be fully repaired. You still have a mortgage to pay, right? That payment doesn’t stop just because the home is vacant or in distress. Don’t worry! If you have Loss of Rents or Loss of Use coverage in your landlord’s insurance, you may sleep like a baby because you don’t have anything to worry about. Loss of rent or in some cases, called Loss of Use will cover up to 12 months of the rental income! Some companies include this coverage in your policy for no additional fees while others charge for it, but… IT IS WORTH IT! It might be a few more bucks a month but, how much is your peace of mind worth?
What a great feeling to know that you will receive money while your property is being repaired.
Let's say you are about to rent out the property and a few days before your resident moves in someone breaks in, and the property gets vandalized!
Again, homeowner’s insurance might not cover you! But, the landlord’s insurance will! However, once your property is vacant for more than 30 days your insurance will not cover you so always get a 60-day vacancy policy. One Air Conditioning unit stolen could cost you $4,000 or more. You can activate your vandalism coverage in this case!
Something important to mention is that some mortgage companies request that you to homeowner’s insurance while you have an active loan with them! Be sure to ask them if this is the case before canceling your homeowner’s coverage and getting landlord's insurance only.
Though not listed in the top four items, liability is the primary focus of the insurance policy. After all, why have a policy if it doesn’t provide basic liability coverage? You may consider increasing the liability coverage if your property has a pool or spa since those are added risks, whether you own the home or are renting the house. For example, your resident has a small soiree, and a kid gets injured because he was running around the pool! We all know, unfortunately, the first thing that comes to some people’s minds is… LAWSUIT! Well, again, here is where you may be able to use your landlord’s insurance liability coverage since this helps you pay for your expenses if you are found legally responsible after someone is injured on your property or if you are required to pay for damage done to someone else's property. I carry $1,000,000 liability coverage on my properties.
We require our residents to carry a renters insurance policy. All new residents must provide a copy of their insurance prior to moving into the rental property. All current residents must provide a recent copy of their declaration page before they renew their lease. We do this to protect not only the resident but you as well.
Two recent fires were caused by the resident, one resident had current insurance and one had let their policy lapse. The flooding of the condo was caused by a contractor working on the unit above and hitting a water line.
Thankfully all parties are safe and no one was injured but you never know when something might happen. It doesn’t have to be a fire or flood, it could be an eviction. People react differently when the pressure is on them, during a recent eviction the resident allowed their animals to poop in the property to the toon of having to replace the flooring. This act was a malicious act and the insurance company paid for the damages.
If you are unsure about your policy, make time this week to talk with our insurance company and confirm your policy. You will be glad you did if you ever have to use it.
If you need a referral to a company that we highly recommend, contact Connie today at 951-289-4063, we are happy to help.