A rental property can be a significant source of income for a building owner, but property damage can quickly eat into your profits. Owners are required to ensure that their properties are safe to live in after repairs are completed—and of course, they must still pay property taxes and costs of doing business while a structure is undergoing repairs. Attorney Bill Voss examines issues in wind damage claims to help owners retain as much of their rental income as possible.
Types of Rental Property Insurance That May Cover Wind Damage Losses
If you live in the same house as your tenant, you may be able to claim wind damage losses under your own homeowners policy. Unfortunately, this is the only situation where damage to a rental property may be paid for under homeowners insurance. Even those renting a second or third home typically cannot use a homeowners policy to collect property damage payments, even for short-term rentals. No matter what the property type, you must always inform the insurer that there is a rental agreement.
There are many different kinds of insurance specifically for rental properties, and each one may pay a different amount for a wind damage claim based on:
- Type of property. Policies for rental units can differ greatly depending on the type of structure and number of units. A policy for one duplex may cost a lot less than one for an apartment building or entire community of multi-family dwellings, but there is also the added risk of additional tenants. The location of the property can also play a role in the amount of coverage, especially if the area sees frequent tornados or hurricanes.
- Depreciation coverage. Policyholders often have a choice between ACV and RCV coverage. One of these provides the full replacement of lost items, while the other subtracts depreciation and provides the remainder as cash value. Saving money on a lower-premium option usually means greater out-of-pocket expenses when it comes time to file a claim.
- Extent of coverage. Like any insurance coverage, dwelling policies offer basic, enhanced, and comprehensive level options. A basic policy is the least expensive and covers the most common adverse events, such as fire and vandalism. Slightly more expensive is a policy that covers additional named perils, such as hail and windstorm damage. Finally, the most expensive is the special form policy, which names all exclusions and provides for any perils that are not specifically listed.
- Structure vs. contents. You may think that any policy that provides for property damage will automatically cover any property that has been lost or broken in a storm. Unfortunately, many rental property insurers will only cover the bare minimum for basic policies. While the structure may be protected from the roof to the foundation, they may not provide for boilers, furnaces, laundry, kitchen appliances, or other equipment necessary to make the building livable. In most cases, the contents of each apartment is not covered by the property owner, but by the renter’s insurance policy.
- Rental income. One important form of coverage that renters often overlook is insurance for the rental income they may lose if damage makes the building unlivable. Tenants may move out temporarily or even permanently during repairs, depriving you of the rental income you need to stay in business. Without loss of rental income coverage, owners may default on their mortgages and lose their properties.
If you are struggling to collect fair payment from an insurer after a storm, we can help. Simply fill out the form on this page today to contact the Voss Law Firm or order a free copy of our book, Commercial Property Owners Must Read This BEFORE Filing an Insurance Claim.