Renting out a few apartments to generate extra income is never a bad idea. Although it seems intriguing, it comes with its own set of challenges. You need to consider your financial interests and see if they are protected. You have homeowner’s insurance with you, but it won’t cover multiple risks, especially after you rent out your properties. Such scenarios prove that landlord insurance is indispensable in landlords’ lives. So, how to safeguard your rental property, and what are the reasons to buy landlord insurance? Let’s find out.
But first things first,
Defining rental property insurance
Rental property insurance is also known by the name of landlord insurance. It covers the risks with regard to your property and other aspects as well. It works as a financial protection for any damages to your property. The coverage options are available in many forms, which provides you with peace of mind, and you can sit back and relax at your home.
Why do you need landlord insurance?
There are high chances your insurance policy covers only your home. In simple words, owner-occupied homes. But if you rent it to somebody else, the coverage no longer remains valid. Renters are not held liable for any damages due to natural disasters or if any person is injured on your rental property. That is where landlord insurance plays its part. So, you must not refrain from buying it.
Let’s dive into the details of how insurance can provide you with peace of mind and shield your rental property.
If the physical structure of your building has been damaged and needs repair or rebuilding, dwelling coverage is the answer you are looking for. Rental property insurance covers any physical damage to your dwelling. For instance – If the walls and roof of your home are damaged, insurance will cover the amount, but it won’t cover the tenant’s personal items. It covers only the damage caused by a disaster. Pay attention to the disasters or perils covered under your policy, like lighting, damage, and fire, to name a few.
Loss of rent coverage
Suppose your rental property becomes uninhabitable. The reason could be any. In such a case, you will lose your rental income for an uncertain period of time. But when you have rental property insurance by your side, you need not worry. It acts as a rent guarantee to you. For insurance – If your rental property has become uninhabitable due to fire and fires are covered in your insurance policy, you will have financial protection. The policy will provide coverage for the rental payments that your tenants are no longer obligated to pay. The time period of coverage is mentioned in the policy. For example – It will provide you with rental income protection for 10 months, 12 months, or as decided by both parties. Sometimes, it is not covered under the standard insurance. So, check in with your insurance provider and choose the best option for your peace of mind.
If someone has been injured on your rental property and it is proved that you, as a landlord, are responsible for their injury in the premises, liability coverage is the protection that will cover you. It covers the legal and medical expenses of the person who has been injured up to the policy limits. If the limits mentioned in the policy are not high enough, according to you, and you want to increase the coverage amount, you can go for buying umbrella insurance for your rental property.
Personal property coverage
Let us tell you that rental property insurance does not provide you with the personal property coverage of the tenants, unlike renters insurance. But it covers the tools or items that you leave at your rental property for the tenants to use. An example could be the lawnmower. You have left it at your rental home, and it got damaged due to a fire. If the fire is covered under your insurance policy, you will also get the coverage amount for the damage to the machine. But if it’s the personal property of the tenant, then it won’t be covered.
Rental property coverage
Protect your insurable interests with the help of landlord’s insurance in the form of rental property coverage. For instance – Your rental property is destroyed, and the reason is a tornado or fire. Your property has faced water damage from the burst pipes. The landlord’s insurance will cover the replacement costs required to fix the property. The amount of coverage depends on the things mentioned in the policy.
Note: Sometimes, people confuse the replacement costs with the functional replacement costs. So, avoid doing that. Functional replacement cost is the cost incurred when you replace the damaged item with an alternative one that performs the same function but is of lower quality.
It is very important for the landlords to equip themselves with proper tools to protect their financial interests. Landlord insurance is one of them. So, make it an important part of your property management arsenal and protect yourself from unnecessary financial misfortunes.