Insuring Rental Properties With a Rental Dwelling Policy
Are you someone who is already a landlord or considering becoming one? Renting out property can be a lucrative wealth-building strategy, but only if you protect yourself and your structure from foreseeable and unexpected potential disasters.
Although your tenants will need renters’ insurance, you can’t depend on their insurance to completely cover one of the biggest investments you’ll make. That’s why you need to take the extra steps to learn more about insurance for rental property owners like you.
Understanding Rental Property Insurance Coverage
As a landlord, what are you expected to cover when it comes to rental property insurance? In general, landlords should always make sure their insurance policies cover the following items:
- The duration you’ll be renting your property. Is your property available for short-term rental, like on Airbnb? Or will you be renting your property for long-term purposes (years) to tenants? If you fall into the former category, a rider on your current homeowners’ insurance policy may be enough to cover your short-term rental occupants, the structure and your personal belongings. If you fall into the latter category, you’ll need a more comprehensive type of insurance than a basic homeowners’ insurance policy provides.
- The type of coverage you want. Insurance for landlords tends to fall into three categories. The first is basic dwelling coverage. You’ll be protected against vandalism and fire, but not windstorms, hail or other disasters. For those, you’ll need to bump up to the next category of landlord insurance. Think you still need more coverage? Ask about a special type of coverage called an “open peril” policy. Unless exclusions are defined in the policy, you can expect them to be covered.
- The types of riders you think you might need. Is your structure in a known flood plain or zone? Is there a higher-than-average chance of an earthquake due to the location? Could a hurricane strike seasonally, destroying the rental property in a few hours? These are all key considerations — and they should govern the type of policy rider you are apt to need. For our local insurers, you may want to consider how close your rental property is to the Susquehanna River or near a common flood zone.
Remember that a landlord home insurance policy needs to be factored into your annual costs of having tenants. Yes, it will add to your bottom line, but it’s essential to feel that your assets are being protected in the event of a problem. Plus, with your renters insuring themselves, you may breathe even easier.
As a secondary note, always ask the municipality if you have to carry specific types of landlord-related policies. Some communities, such as beachside condos, have requirements you might not have been made aware of when you purchased or inherited the structure.
How to Create a Comprehensive Rental Property Insurance Plan
Now that you know you need rental property insurance, it’s time to take the next steps and contact an independent insurance agent. Your agent will make certain that your insurance carrier is perfectly suited to your needs, giving you and your tenants peace-of-mind in the case of a manmade or natural disaster.
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