What Type of Coverage do I Need for my Rental Properties?


 

You’ve moved to a new house and decided to keep your other home and rent it out. Congratulations!  You are now a landlord. Are you aware that your homeowners insurance may not cover a loss if someone other than you lives in your old home (even if it is a family member and they are not paying rent)?

Rental properties (including vacant properties) should be protected with a “landlord” policy -- sometimes referred to as a "Dwelling" policy.  A basic “Dwelling” policy covers fire, lightning, wind, hail explosions.  Dwelling policies only cover the types of perils (losses) that are specifically named in the policy.  Vandalism is not usually included. Water damage from pipes or appliances may also not be covered.

There are optional coverages that can be added to the basic Dwelling policy, like coverage for loss of rent, medical payments, and personal liability.

It’s important to note that basic Dwelling policies cover Actual Cash Value (ACV), which means your out-of-pocket expense will be higher if you have a claim. Your deductible as well as any depreciation are subtracted from any claim payout. 

For example, hail damage destroys your 16-year-old roof.  You've received a repair estimate from the roofing company for $14,000. The insurance company calculates your roof’s Actual Cash Value (ACV) based on the age, type and roof life expectancy. ACV of the roof is determined to be $5,000 (replacement cost minus $9,000 depreciation).  Your policy deductible is $1,000. The claim payout would be $4,000 ($14,000 minus $9,000 minus $1,000). Your portion of the repair would be $10,000.

Basic Dwelling policies do not cover the occupant’s personal belongings.  It is highly recommended that you advise your tenant to purchase “Renters” insurance, which protects their personal items against fire and other losses. Renters insurance also covers personal property stolen out of an insured's car while traveling.  Renters insurance also includes personal liability insurance, which protects them if someone is injured in the home and a lawsuit is filed against them. Last, but not least, it pays the extra cost of food, rental and other items, if your tenant has to move out for a short time because of damages from a covered loss.

In summary "rental" insurance covers the structure, and "renter's" insurance covers the contents inside the home. 


Comments

Post a Comment

Popular posts from this blog

Why Does My Homeowner Policy Have Such a High Dwelling Limit? My House Isn't Worth That Much!

Image
The "value" of your home is different for real estate, taxes, and insurance.  Let's look at the differences  between a real estate appraisal , the purchase price , the property tax appraised value , and the reconstruction cost estimate .   Let's start with the property tax appraised value. With older homes, the amount taxed can be very different than the real estate appraisal. A real estate appraisal takes into consideration the age and condition of the home, plus upgrades and additions. The purchase price is usually based on a combination of the real estate appraisal and the  market value . Market value is the amount similar homes are selling for (within a certain distance of the home's location). The reconstruction cost estimate is the amount insurance companies use to calculate the cost of rebuilding your home if it is severely damaged or is a total loss after a covered event such as tornado or fire. Although each carrier uses their own version of the RC...
Read more

Off-Road Vehicle Insurance vs Coverage as Part of Homeowner's Policy

Image
Photo: Courtesy of  Mikhael Mayim @pexels.com If you have an ATV, Side-by-Side, Golf Cart, Dune Buggy, or other off-road vehicle, some coverage may be provided on your homeowner policy.  So why buy off-road vehicle insurance? Home policies typically have restrictions based on vehicle maximum speed, engine size, usage and value. Liability coverage may exist, but only on the residence premises. Extra coverage for off-premises use may be available for an additional premium on your home policy, but not all vehicles are eligible. Medical payments coverage on the off-road policy is primary, and will pay in the event of a loss before any other insurance is applied.  Medical coverage option (for off-road vehicles) is not usually offered on home policy packages. Physical Damage coverage is for direct and accidental loss for many kinds of claims (weather, collision). Usually, a separate policy must be purchased for this coverage, over and beyond the homeowner policy. An off-road po...
Read more

Protect your Stuff with Renters Insurance

Image
Your landlord's insurance policy does not cover your furniture and other valuables. Your TV, laptop -- the cost of the stuff in your place adds up quickly. If you live in an apartment, and your upstairs neighbor overflows the tub and your clothes, shoes, and furniture are destroyed, can you afford to replace everything? Can you afford to stay somewhere else while your apartment is being repaired? Renters insurance covers your property against windstorms, fire, and theft. Most Renters policies even extend coverage to personal property that you have in a storage unit. It also covers personal liability, medical payments to others, and provides for temporary living expenses. Did you know that Progressive Insurance customers enjoy a single deductible in the event of a claim that affects both their Progressive Renters and their Progressive Auto policy?  Bundle Auto and Renters insurance for a discount.  Renters insurance is super affordable -- as low as $11 per month.   Ca...
Read more