You can generate a good secondary earning by becoming a property owner. It is also an excellent chance to make it your principal source of income. When you become a property owner, it becomes fundamental to know about the essential insurance policies in order to protect your possessions.
Without insurance in place, you are at risk of losing money and your business. Some people may see insurance as a needless additional expenditure. But, it certainly keeps your property and business protected against any kind of calamities. Below, you will learn why it is crucial to have insurance when you own a property.
Why insurance for property-owners is a must-have?
The insurance policies for landlords cover an extensive range of calamities. Their property can be affected by nature or by people. Homeowner insurance is essential if there is a fire, flood, earthquake, or any other natural disaster causing damage to the property or any piece of equipment. Your homeowner's insurance gets null and void when you rent your property out.
You have to get a landlord insurance policy when you start earning from your property through rent. A general rule for renting is that the tenants won't be paying for any damages to the property caused by any accidents. The property owner can be held responsible if someone gets injured on the property. So, you should have the correct type of insurance policy to save yourself from monetary damages.
What is covered by landlord insurance?
Different insurance providers have different insurance policies for landlords. Whatever policy you get, the coverage has three categories DP-1, DP-2, or DP-3. Starting from basic to most far-reaching coverage.
To be safe, the policy you get should have at least these main protections:
1. Property damage
As far more natural catastrophes are occurring now, the insurance you have must include coverage for property damage. Natural disasters like earthquakes, floods, fires, or thunderstorms are included in this coverage. Electrical or gas-related issues will also be taken care of in this type of insurance. This insurance also covers property damage caused by tenants. A good idea is to get a policy that covers the cost for the replacement of items in case of old things.
2. Rental default insurance
In some cases, your property is no longer suitable for living for a certain time. For example, when there is a pest infestation, mold, or termites in your house, you will have to get it treated. You won't be getting any rent for your property during the treatment time, so you lose your regular income. Rental default insurance will cover these kinds of losses, and you will get a steady income during the time your property is not rented out.
3. Liability protection
As a property owner, you are exposed to several calamities. One of these can be a tenant getting an injury caused by a lack of maintenance at the property. You can get under a lawsuit for such cases and have to bear high legal or medical costs. You can use Liability protection insurance for such cases. You should go through the insurance documents to know what it covers. Mostly, liability protection gives you coverage for injures due to icy paths, structural collapses, and much more.
Additional cover for landlords
When you get any type of insurance, you can stay with the basic plan or add the additional cover. In addition, there are some other insurance coverages that protect you from unexpected damages.
Additional coverage can include:
Guaranteed income insurance: With this coverage, you get your money even when a tenant doesn't pay you the rent.
Flood insurance: With this insurance, you are covered for any damage caused by water, be it natural floods or plumbing issues.
Emergency coverage: With this type of insurance, you get coverage for any emergency repairs that you have to do for the tenants. For example, if there is a pipe leakage at your property for which you have to bear not only the transport cost but also the fixing cost.
Additional construction expenses: This type of insurance covers the cost of any additional construction you had to do in order to meet building regulations.
Other landlord insurance types
The other landlord insurance types depend upon your property's location. These also depend upon what kind of situation you are in. For example, you might need workers' compensation insurance if you have any workers at your property.
These extra insurance options may include:
Rent guarantee insurance: With this insurance, the property-owner is covered for the period in which the tenant doesn't pay rent. This covers the time period of six weeks to six months. The owner can carry out the tenant removal process in this period.
Security deposit insurance: This insurance will cover any loss through a security
deposit that has been previously collected by the provider. The provider will pay the owner cost of damages or unpaid rent.
Sewer backup insurance: This is an add-on policy that will cover matters related to sewerage systems. This can be a secondary coverage with the hazard and fire coverage.
Terrorism insurance: With this type of insurance, you are covered for the event of any terrorist attack at the property.
Builder's risk insurance: This insurance policy is a distinctive and will cover you in case you need renovation of your property. The hazard and fire coverage is not valid for renovation.
General contractor insurance: This type of insurance policy will cover the expenses of permits you will need if you want to become a general contractor for renovating your property.
Workers compensation insurance: This insurance will cover the cost for staff employments, upkeep workers, contractors, or property managers.
Why is renters insurance required by landlords?
Sometimes it can get hard to ask tenants to purchase additional insurance. As a property owner, it is in the best of your interest to have tenants with renters insurance. Include this policy in the rent agreement to make sure your tenants get it.
This type of insurance is important because the personal items of tenants are not covered by the landlord insurance policy. Suppose there is damage to any personal property of the tenants. In that case, they will be covered for the loss if they have this insurance, for example, in case of a flood that destructs the property from inside along with the renter's personal items like laptops.
The landlord's insurance won't be covering the damage to the personal item (laptop).
The landlord should ensure that the tenant has this insurance because if any damage occurs to the renter's personal property, they may hold the landlord responsible for it. In addition, in some cases, they may refuse to pay the rent or even file a lawsuit against the owner. So to avoid this kind of situation, you should make your tenants get this low-cost insurance.
Perks of being a landlord- if done right
Having able to rent out your property at a good price is not enough. You also need to manage it properly. If you are a landlord, that doesn't mean that you are always dealing with issues and problems. However, you can actually enjoy being a landlord.
What is covered vs. not covered in renters insurance?
You may be wondering what is covered by the renter's insurance. Similar to landlord insurance policies, the renter's insurance cover also depends upon the provider. As a landlord, you should ask your tenants to get the renter's insurance with natural disaster, theft, injury, the replacement cost of items, and utilities backup coverage. What is typically covered in renter's insurance is clothing, electronic appliances, and jewelry.
Renter's insurance won't cover a few things like riots, pests, and earthquakes. Damage to cars or the property of a roommate is also not covered in this type of policy. The tenants should read the policy carefully to find out what is not covered. The renter's insurance might get tricky in the case of pets or animals. These might cover a bite from a pet dog but not for a wild or specific breed of dog.
Conclusion
As a landlord, your insurance must cover liability and property damage. Insurance may seem like an additional cost, but it sure pays off when you need it. You need to be extremely careful in selecting an insurance type. Being underinsured is also not a good idea. So, make sure you get the coverage that you need for your property to avoid any kind of loss.