Before you purchase or consider purchasing an investment property, it’s important to investigate all of your insurance coverage options. It’s first essential to understand the difference between typical home owners insurance coverage and insurance for investment property. A home owner insurance policy is specifically created for the owner-occupied resident. This kind of policy ensures protection for the home, the contents, and the owner’s liability. A dwelling policy for the investment property has different coverage objectives to thoroughly protect your investment. Below is a basic overview of both types of coverage.
- Personal Property
Landlord policies should include coverage for personal property. While renters are responsible for covering their own belongings, a landlord is responsible for any included appliances, such as a refrigerator, stove, disposal, dishwasher, washer and dryer, even when the apartment isn’t fully furnished.
- Dwelling
A dwelling policy is designed to cover the entire structure in case of a disaster. The type of home owner insurance policy you purchase will dictate the types of disaster covered, such as wind, rain, fire, flood and more. Be careful to consider whether you purchase a policy that pays actual cash value or replacement cost, which can mean all the difference between financial disaster and a secure investment.
- Separate Structures
This coverage applies to smaller properties, including garages, sheds, and other unattached structures. This kind of coverage is generally included in a homeowner’s policy. Depending on the coverage, separate structures may need an additional endorsement on your policy, especially for landlords.
- Fair Rental Value/Loss of Use
If disaster strikes your investment property and you can’t rent it out, how do you make money on your property? Your insurance policy should include coverage for Fair Rental Value, otherwise known as Loss of Use. This will provide payment for lost rent from the time of disaster.
- Liability Insurance
Liability coverage is the most important aspect of any landlord policy. A property owner will often require more protection because of the increased risk associated with renters and the number of people who enter and leave the property. This type of coverage offers protection if someone files a claim for property damage or negligence. Landlords often have less control over what happens on their property than at their primary residence. Depending on the situation, an umbrella policy may be the best choice. An umbrella policy is a blanket policy designed to cover liability. Most property owner policies should carry a limit between $25,000 and $1 million on liability claims.
- Medical Payments to Others
This type of coverage offers protection if a renter is injured on your property. Inexpensive renters insurance is something that should also be discussed with a potential renter. There are many types of property and home owner insurance coverage options, and each one contains a varying level of comprehensive coverage. It’s important to find the best policy for your individual situation. Remember, policies may differ, particularly if you own multiple investment properties. To better understand the myriad of options, contact us today for an appointment.