Landlord Insurance: What to Know Before You Buy

Landlord Insurance What to Know Before You Buy | Insurance by Castle

Landlord insurance is a type of blanket insurance that covers your rental properties in the event of damage or loss.

Unlike traditional homeowners insurance, which doesn’t cover rental activities, landlord insurance will keep your investments protected against liabilities and also your rental income safe if your property becomes inhabitable.

This blog will cover some broad details of landlord insurance to help you understand some terms and concepts you’ll need to know when you shop for landlord insurance.

The Different Types of Landlord Insurance

Here are a few different types of landlord insurance:

  • Liability: In the event of an accident on your property.
  • Damage: Vandalism, bad tenants, and fires are risks regardless of who is in the home.
  • Loss of Income: If your property becomes uninhabitable, landlord insurance can provide temporary relief in the form of reimbursed rental income.

Every landlord should ensure they have at least the above coverage on all their properties. For special situations, there are optional coverage riders that may add more suitable protection.

Rider Coverage

In addition to primary concerns like liability and damage, riders can be added to protect you from additional risks like floods or even a change in laws or your tenant’s circumstances.

Possible rider additions to landlord insurance are:

  • Flood: Most homeowners’ insurance policies don’t cover floods.
  • Guaranteed Income: Covers late or missed payments by tenants.
  • Emergency: Emergency repairs, damage, or leaks while a tenant occupies the home.

Law and Ordinance Coverage

This is another type of rider that can be added to landlord coverage.

When a building code or ordinance violation is discovered during the repair of damage that was already covered by the insurance policy, a law and ordinance rider could cover the upgrades needed to bring the building up to code.

If you own an older building that may have been constructed before new laws were enacted, this coverage is worth considering.

Deductibles and Limits

Deductibles and limits are terms you’ll come across when shopping for landlord insurance. Here is an explanation of both to help you make the best choice possible.

  1. Deductibles

Just like most other forms of insurance, landlord insurance often comes with a deductible. This is an amount that you have to pay before the insurance does, even on covered expenses.

For example, if you need to replace a covered appliance, you may have to pay a $1000 deductible out of pocket before the insurance covers the rest of the costs. 

In general, a higher deductible means you share more of the costs which means a lower premium. However, higher premium plans are not always the best way to save money. Consider how often you expect to use the coverage and what the likely costs of the covered items would be out of pocket. Using this information is the best way to determine what deductible/premium package is right for you.

  1. Limits

Limits are the maximum amount an insurance policy will payout. They are defined on a per-occurrence and/or aggregate basis. Limits will likely appear in your policy in some combination of these three ways:

  • Per Occurrence: A per-occurrence limit defines the amount that a policy will pay for one individual occurrence of a claim. For example, if you submit a valid claim for $100,000 but the per-occurrence limit for that type of claim is $90,000, you will be responsible for the remaining $10,000.
  • Aggregate: An aggregate of two or more smaller claims adds up towards an aggregated limit. Using the above example, if the aggregate limit for those types of claims was $180,000, you could submit one more identical claim and have it paid at $90,000. After that, the insurance policy has reached its aggregate limit and will not pay anymore, even on valid claims.
  • Total Limit: Some policies have a total limit on coverage instead. These are more straightforward and set a total dollar amount that the policy will not exceed.

Finding the Right Landlord Insurance

Remember that your homeowners insurance is probably not sufficiently covering your property if you decide to rent it out.  

Also, consider any special risks your property might have and see if you can plan for them with rider coverage. Getting the right insurance policy might take some research, but it’s the best way to keep your investments protected so contact Insurance by Castle today!

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