July 11, 2010

LandLord Insurance

My dad recently got a landlord insurance policy for his rental properties.    Previously he just had standard  property insurance that insured the rentals against fire or other similar damages.   His previous policies had some liability coverage but he had to pay extra to get it increase above the minimum.  Now the landlord policy gives him better protection. 

His new landlord policy offers liability protection and loss-of-rental-income coverage.  These are both important for landlords. 

Liability coverage is a very good idea to help cover you in case you get sued by a tenant for bodily injury or property damage from your property.  A good beefy liability policy covering you for at least a few hundred thousand dollars is a very good idea for a landlord.  Personally I think the real risk of a serious lawsuit are not as much as people seem to think and our society is a little paranoid about lawsuits.  But lawsuits certainly do happen and a large settlement could potentially wipe you out to the point of bankruptcy so you should be covered.  For that reason I'd consider liability coverage a 'must have' item - better safe than sorry.

The loss-of rental-income bit is also a good idea to have. The loss of rent coverage is only going to pay you if you lost income in the case of something like a fire or similar.  From what I've seen they do not cover loss of rent due to renters who don't pay or due to vacancies.   Even though its limited the loss of rental income coverage is still a very good thing to have.   If your property happens to be destroyed due to a fire then a normal fire policy will cover the damage to the building.  But typical property insurance will not compensate you at all for lost rental income.

There are several companies offering landlord insurance.   Met Life has a landlord insurance policy.  Foremost Insurance has landlord coverage.   Safeco also has a policy.   I'm sure there are many other insurance companies that offer such policies but I dont know if all insurers have something like this.   Our insurer never mentioned such a policy and we explicitly told them we are renting the properties.  Calling our own insurer to check into landlord insurance is on our own to-do list.

The landlord policy that my dad has is actually pretty competitively priced versus the individual property insurance policies he previously had.   One reason for that is that he's got multiple properties covered under one policy so he's getting a discount for having all the properties insured together.  If you shop around you may be able to find a reasonably priced landlord insurance policy and it will offer additional protection that will benefit you as a rental property owner.

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