One of the things that I am constantly preaching to new clients and existing clients is “make sure you have the proper insurance in place”. Not all insurance policies are created equally, a homeowner's insurance policy is not the same as a landlord policy, and a landlord policy is not the same as a renter’s insurance policy. Today, I want to focus on Landlord Insurance policies.
Over the last three decades and leasing over 10,000 properties, if there is one thing, I have learned it is making sure you have the proper insurance in place is essential to protecting your property both financially and physically. There are several variations of landlord policies out there to choose from. This can make it slightly overwhelming to know which coverage you SHOULD have, and which coverage is just fluff.
My first recommendation would be to find the last page of the policy and read the fine print. THE EXCLUSIONS specifically. That is the quickest way to know what is NOT covered in your policy.
There are four major things to look for to be INCLUDED in your policy.
1. Malicious Intent
2. Loss of Rents
3. Vandalism4. Fire and Liability Let’s take a look at each topic and break it down as to why it’s crucial to have these included in your policy. Here is a quick guide for your reference.
By definition, Malicious Intent occurs when the resident damages the property above normal wear and tear. While this is rare, it can happen nevertheless. We have seen it even though our residents are screened thoroughly. Things still happen. Normal wear and tear can be ambiguous for most, that’s why it’s important to know what the courts consider normal wear and tear. Smearing dog feces all over the walls and carpet is not normal wear and tear. Yes, I have seen it. Having a clause in your policy covering Malicious Intent would cover replacing the carpet in this case after your deductible of course. Replacing carpet after your resident has lived in the home for 11 years, well that would be normal wear and tear in most cases.
Loss of Rents
Having a “Loss Of Rents” clause in your policy will ensure you receive rent up to a year in the event the property burns down or there is severe damage to the property caused by the resident. Suffering a loss of a property in a fire or other event is painful enough, but losing the monthly rent at the same time is the nail in the coffin so to speak. Having said that, if you have “Loss of Rents” your financial loss won’t be so bad. During our 30 years of business, we have had 4 homes burn down, a couple of homes flood during rainstorms, and a few other disasters. Some landlords had their policy in place and others didn’t. Guess which ones were glad they were covered when disaster came.
Who would vandalize someone else’s home? Well, sadly it happens. Vandalism coverages apply primarily to vacant properties. And will cover you in the event that someone breaks into your home and steal items. Items such as kitchen cabinets, copper piping, or fixtures. Having said that, most coverages only cover the home the first 30-days it’s vacant.
Thus a major reason it’s important to get your property rented quickly and get a new resident moved in as soon as possible. If a property is vacant for longer than 30-days and something happens to the home, like the AC unit being stolen for $3000, you will foot the bill for the new unit.
Fire and Liability
Fire and Liability are standard in most policies but I still like to mention them when talking about this topic. It’s important to know what is in your policy.
As I previously mentioned, during our tenure as a company we experienced several home fires.
Not only do I review with landlords the importance of having the proper insurance in place, but I also review it with the residents as well. Management One now requires all residents to have a renters insurance policy in place with a minimum of $300,000 and list Management One as additional insureds. Providing protection for both you and the resident. Should there be malicious intent, your insurance company will seek restitution from the residents’ insurance, not yours so your insurance rate doesn’t go up. Or if there is a fire at the home that was caused by the resident you will have recourse in recouping some of the costs to repair the home.
I encourage all landlords to review their policies annually to ensure nothing has changed in the fine print. Seek to reduce cost by getting a new quote from your current company as well as a competitor or two and make sure the cost to rebuild your property is adjusted as building costs go up and you don’t want to get $300,000 when it’s going to take $400,000 to rebuild the property, VERY IMPORTANT.
So, if you have not looked at your landlord / rental policy in a while, I recommend taking time this month to do so. Don’t find yourself in a situation of needing the coverage and not having it.
If you need someone to assist we have insurance companies we can refer you to.