Home Insurance For Rental Properties – It should be the responsibility of property owners and their property management companies to ensure that their income properties are insured. But where do you start? We’ll cover the types of rental property insurance you’ll need as an owner, the different coverages your property manager should have, and the benefits of listing each as “additional coverages” on your respective insurance policies.
There are specific types of rental property insurance policies that are important to have in place to cover the risks of owning a rental home. The other policies listed below are optional but you should also consider them, depending on your property type.
Home Insurance For Rental Properties
Homeowner’s insurance is important for income property owners. This type of rental property insurance has two types of coverage designed for property damage and liability.
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Property damage coverage should help you with repair costs associated with damage to the physical structures of the rental unit, such as when a fire destroys the main structure of your rental or when wind blows under a fence. This challenge extends to the equipment or tools you use to maintain the property, such as lawn care equipment damaged by a hailstorm.
At the same time, liability coverage protects you against costs arising from personal injuries that occur on property. If a resident were to fall down a flight of stairs using a poorly maintained handrail, for example, an insurance policy could protect you from paying their medical bills out of pocket.
You may want to purchase additional policies for unexpected accidents. Many insurance companies offer separate coverage for earthquakes, floods, vandalism, space losses and construction-related expenses.
Knowing the location-specific risks of your rental unit is important so you can determine which policies will best complement your rental service. For example, California homeowners and property owners are generally encouraged to purchase earthquake insurance since the risk in this area is higher.
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Even if you already have homeowner’s insurance, this may not cover any of your permitted income. Owners typically purchase different types of rental property insurance because a typical homeowner’s policy only covers the private residence owned by the policyholder.
Another major difference between these two types of insurance is the extent to which personal property is covered. Rental property insurance only covers items used to maintain the property (lawn mowers, power washers, tools, etc.). Homeowner’s insurance covers many household possessions such as clothing, electronics and furniture.
It is important to note that no policy covers collectibles, such as art or high value items, and expensive jewelry. These items require a special cover. Additionally, the tenant’s property will not be covered by the homeowner’s or rental property’s insurance policy. Your tenants will need to purchase renters insurance for this purpose.
Insurance for property owners focuses on the physical structure of the unit, maintenance equipment, and the well-being of the people living on the property. On the other hand, asset managers can benefit from policies that address the risks associated with fraudulent trading practices.
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Businesses in various industries carry general liability insurance to prepare for any claims that may arise from day-to-day business practices. For example, someone sues your property manager for copyright infringement over a photo they used for marketing. In that case, their general liability insurance should be able to cover the legal cost.
E&O Insurance is real estate industry coverage that protects against errors, inaccuracies, misrepresentations and negligence. Let’s say a property manager lists the wrong school district in their marketing materials for your property. The realtor then selects your property based on that information to find out it’s not true. If the tenant were to sue, E&O insurance would protect the property manager against financial losses.
In addition to the general liability and E&O insurance required, your property manager may consider purchasing the following policies:
Since you and your property managers have a joint responsibility, it is wise to complement each other in your respective policies. You can extend your coverage to your property manager by adding them as an “additional insured” policyholder.
Can I Still Get Landlords Insurance For My Property ?
Say a resident is traveling on a poorly maintained trail on your property and breaks his ankle. They can sue you and the property manager for the damage. The liability section of your landlord’s rental property insurance will protect you. But what if your property manager had pointed out a potential hazard, and you still haven’t approved the remedial work? Your property manager will not have to bear the financial burden of a lawsuit if they appear as an “additional insured” policyholder under your insurance policy.
The Poplar Homes team writes and curates original, insightful articles from the input of our entire publishing team. Our team writes about prominent company and industry news topics that we believe are worth sharing. The Poplar Homes team represents the Poplar Homes Property Management blog that provides a seamless rental service compared to a traditional property manager. Through a combination of automation and careful human touch, Poplar Homes’ technology enables its team to provide on-demand showings, instant rental surveys, AI-driven rental data, fast maintenance, and 24/7 support.
This content is created for informational purposes only. None of the information herein is intended to provide legal advice and should not be construed as such. Consider getting legal advice from your attorney about any proposed decision or course of action. The answer is not necessarily the simple answer, or the ‘yes or no’ answer that many are looking for. This is because insurance is a complex product, and several contributing factors affect a person’s insurance premium.
Homeowner’s insurance is a type of insurance that covers the structure of an investment property and any items owned by the homeowner (eg carpets, fixtures, dishwashers). Some homeowner’s insurance policies include additional protection against tenant damage, loss of rent and rent default.
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Although insurance policies vary, the table below summarizes the differences between insurance events that are generally covered.
If homeowner’s insurance includes extras like tax loss, why isn’t it automatically more expensive than homeowners?
In the end it’s like comparing apples to oranges. An owner-occupied home with thousands of dollars worth of property (ie furniture, personal property) cannot be compared to a clear investment property even if the property itself is of similar value.
If you used the concept of comparing like-for-like properties, the obvious, homeowner’s insurance may be more expensive than the homeowner’s option. But in reality this cannot be done because the owner-occupier would not live in an empty house.
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The most important thing here is that the hosts are designed for you and your belongings in your home. Although home owner insurance is designed specifically for investment properties and the risks they face. There are many different coverage areas in insurance policies that do not apply to each other.
For example, if the power went out and all the food in the fridge went bad, you can’t claim this blame for the investment because you don’t live there but you can with the landlord. The same applies to temporary accommodation if required after an insured event.
Like any investment, rental property is open to risk. Even with the most reliable planners, the unexpected can always happen.
If you don’t have enough coverage, you could be out thousands of dollars in the event of a claim.
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There is also the risk of not having the right type of homeowner’s liability insurance. For example, home owners insurance usually does not cover legal liability if the property is used for ‘any business use’, and if the investment property is generating income this may be classified as business use. Therefore, if you had homeowner’s insurance on an investment property you may not have liability coverage if someone were to be injured on the premises.
Despite this, research shows that approximately 83 percent of properties are uninsured. This could be for reasons such as not having the right type of insurance (eg owning the house and its contents but not the home owner) or having the right type of insurance, but not enough.
Is your investment property a short term or holiday rental, long term rental, shared accommodation or complex?
There is no ‘one size fits all’ approach to property insurance and the first step is always to be insured. For example, a short-term rental such as a vacation home rented for three months of the year does not have the same insurance requirements as a long-term rental.
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The cheapest option is not always the best option and knowing your options is important. Know what is and isn’t covered, read the fine print and feel free to know you’re covered if the unexpected happens.
An insurance agent can help you find an adequate policy, help you through the process and can manage any potential claims process.
The replacement cost of your property is essentially what it would cost to rebuild your property. This includes factors such as the cost of construction, taking into account site restrictions, changes in costs over time, costs of demolition and removal of hazardous materials. Knowing this will tell you how much insurance you will have
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