Landlord Insurance 201
Landlord Insurance 101 was a basic overview of what a Landlord Policy is designed to cover and not cover. In this article we will go into more detail about the coverage provisions, endorsements, and tips for selecting the right Insurance product to protect your asset.
Landlord Policy Coverage Breakdown
Here is a list of how the coverage for a typical Homeowners Insurance policy will be listed:
A. Coverage for the structure or main dwelling.
B. Coverage for other or separate structures.
C. Coverage for personal property or belongings.
D. Coverage for Loss of Rental Income.
E. Coverage for Premises and Personal Liability
F. Coverage for Medical Payments to others
Here’s How It all Works:
A. Dwelling or Structure
This portion of your policy pays up to the policy limits to repair or rebuild the home in the event it is damaged or completely destroyed by a fire, hurricane, water damage or other covered loss listed in the policy. Most standard Landlord Insurance policies include an endorsement called an Extended Replacement Cost endorsement that will pay for an amount or percentage above the specified policy limit to ensure full replacement of the home in the event that it is completely destroyed. This will be discussed in more detail later.
B. Other or Detached Structures
This part of your Landlord Insurance policy provides coverage for any structure not attached to the main dwelling and can include such items as: a fence, pool or spa, outdoor kitchen, detached garage, guest house, tool shed, gazebo, palapa, pergola etc. Usually all of these structures are covered up to 10% of the coverage listed under the Dwelling portion of the policy. If you have several of these items you may require more coverage. Talk to your insurance agent or broker about increasing this coverage.
C. Personal Property
Generally coverage for personal property of the Landlord is included by endorsing or adding additional coverage for an additional cost. Items like refrigerators, washers and dryers plus any other items located at the property for use by the tenants or for maintaining the property such as a lawnmower would be items worth purchasing this additional coverage for. If the property is a “furnished rental” then additional personal property coverage would be added in an amount to adequately replace all of the items like furnishings, kitchen equipment, dishware, etc.
D. Additional Living Expenses / Loss of Use
If the home becomes uninhabitable due to a covered loss, (Meaning that the damage is severe enough to render the home unfit to live in) this section of your Landlord’s Insurance provides coverage for loss of rental income you will most likely miss out on as a result of not being able to rent the home after it has been damaged or destroyed. For example if there is a major pipe leak or significant damage from a fire it may be several weeks, months or even years before the insurance company can repair the damage or rebuild the home. Keep in mind that if you have a mortgage on your home you will still be obligated to make your regularly scheduled mortgage payments while the home is being repaired or rebuilt. Having enough of this very important coverage is often overlooked by consumers when purchasing Landlord Insurance.
E. Medical Payments to Others
A Landlord’s Insurance policy also provides no-fault medical coverage. In the event a friend, guest, relative or neighbor of the tenant not permanently residing at the home is injured on your property he or she can simply submit medical bills to your insurance company. This way, expenses are paid without a liability claim being filed against you. You can generally get $1,000 to $5,000 worth of this coverage. (More is better) Household residents or tenants as well as family members residing in the home or pets are generally not covered. This coverage is included for the purpose of paying for the smaller medical claims.
F. Personal Liability
The Personal Liability section of your Landlord Protection Insurance (Often called O.L.T. liability which stands for owners, landlords and tenants liability) protects you against more costly injury claims and potential lawsuits for injuries that occur on the premises. For example if someone falls off of the roof or gets severely burned from the barbeque and winds up in the hospital trauma center needing surgery, rehabilitation, physical therapy, loss of wages and the list goes on, then it’s likely the injured person will file a lawsuit against the property owner to recover these damages. The liability portion of your policy pays for both the cost of defending you in court and any court awards up to the limit of your policy. Most basic Landlord Insurance policies generally provide $100,000 of coverage. However coverage increments of $300,000 and $500,000 are also available for a few dollars more.
Landlord Insurance – Things to look for and look out for (coming soon)