a vandalized home

How to Tell if You Have the Best Insurance Coverage

By: Ron Sudman
April 5, 2021  | 

Having proper insurance is essential for ensuring you have maximum protection against any significant unforeseen events. Horrific events such as your rental property catching on fire, flooding, vandalism, or other damage by the resident.

During the last 35 years of business, Management One has seen it all the above and worse. I feel it my mission to educate all my clients on the importance of having proper insurance and why it must include adequate coverages.

There is a misconception that “the resident has rental insurance, so that covers it all.” And the answer is “No,” it doesn’t. Renter’s insurance covers the resident’s belongings and any damages they may intentionally or unintentionally cause. That’s where their coverage stops.

Insurance Coverages that will Protect You Against A Major Horrific Loss

We strongly suggest you have a landlord policy but with some special coverages so you can sleep at night. Fire, Liability, Vandalism are standard, but these next two are typically left out. It’s imperative that you have “Loss of Use (Rent)” and “Malicious Intent” coverage.

Loss of use (or rent) will reimburse you rent for a year if your house were to burn down or other catastrophic events, so you can still make your mortgage payment, or if you own the property outright, your income stream will continue uninterrupted. The fire coverage of your policy will rebuild your house.

Case in Point: Years ago, a plumber was sawdering a water heater and caught the insulation on fire. The home burned down to the ground before anything could be done. The resident lost all their belongings, and the homeowner lost a rental property. The contractor’s insurance paid to rebuild the home but didn’t cover the owner for loss of rent, essentially income, while the home was being rebuilt. All the while, you still have a mortgage to pay. That’s where this excellent insurance coverage comes into play, Loss of Use and in this case, paid the homeowner the rental income for nine months while the home was being rebuilt. This very scenario is also why we use License, Insured contractors. It might cost a bit more, but the job is done right, and you’re covered in a nightmare situation like this.

Malicious Intent.

Let me explain. Malicious Intent is not vandalism. Vandalism occurs outside, think graffiti or breaking windows. Malicious Intent occurs when a resident intentionally damages or destroys your property. The Malicious Intent coverage will cover up to an impressive 90% of the damages, in most cases, depending on your carrier. We have found Safeco and Farmers pay out very well. I’ve had this happen to one of my rental properties, and the insurance company paid out on it. Many owners think a Management Company can protect you against Malicious Intent. Unfortunately, no company can, nor can you. While we qualify a person on credit, employment, etc., we don’t know their behaviors. While this is very rare when it hits, it’s usually a significant number, just like when your house burns down, right?

Case in Point

I recently had a phone conversation with a client whose property was under eviction. This client has been with Management One for 32 years, and when I mentioned opening a claim with the insurance for the damage caused to the property, the client stated, “I don’t think I have that coverage on my policy.” Had the client followed my advice all these years, he would not have had to pay $6,000 to rehab the home. What a massive blow to the pocketbook when you already lost rent for months on end during the eviction.

Due to this very situation, this year, I implemented a program where our Business Development Person will personally call every owner like yourself every year to make sure you have your ducks in a row with proper coverages and more.

Vacancy Coverage

When your property becomes vacant, most insurance companies will cover outside items, such as your Air Conditioning unit, for 30 days. In a typical rental market, it takes about 45 days to turn a property around. So, confirm with your insurance agent that your policy has a 60-day coverage while the property is vacant and guaranteed to provide coverage for items like an A/C unit. To replace an AC unit can be as much as $4,000 if stolen or damaged while no one lives there.

Case in Point

There was a time when the rental market was flooded with properties for rent. It was not uncommon for properties to sit vacant up to 60 days before renting. It also was not uncommon for AC units, cooper piping, etc., to be stolen. We had such a thing happen at several properties one year. It was a terrible loss for the landlords as not only were they losing rent because the home was vacant, but then they faced having to replace the AC unit.

You may feel like, “oh, it will never happen to me.” Well, I am here to tell you that you never know when disaster can strike. It’s better to be prepared than not. Especially in Southern California, you never know when a raging wildfire will come sweeping through. Or a flood bringing rushing rainwater through the property. Or tornado-like winds coming blustering through, toppling trees and fences. Again, we have experienced all things here at Management One in 40+ years and renting out over 10,000 houses, so we’ve seen it all.

Toy house being shielded by a hand


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