Many policyholders erroneously rely on their standard homeowners insurance to cover their rental property. The truth is, the insurance for an owner-occupied home is different from the insurance for a rental property.
You need more than standard homeowners insurance in this case because it presents more risk to both you and your insurer than the home you live in.
However, your home insurance can cover you if you occasionally rent out a part of your primary residence. But if you're renting out a house or other investment property for a long time, then it will be better to purchase landlord insurance, which is also known as rental property insurance.
Let's face it, leasing out a house or other property you might have is a business that can generate extra income for you. But like every other business, it also comes with lots of risks. For example, tenants may fail to pay their rent on time, natural disasters such as floods or wind may damage your property, or a tenant may sue you.
When unfortunate incidents like these happen, your out-of-pocket expenses could easily outweigh the amount generated from your rental property. This is why having landlord insurance is important. It protects you from the financial risk associated with tenants living in your house.
Below is everything you need to know about landlord insurance and how it covers your rental property.
Landlord Insurance
According to the Insurance Information Institute, landlord insurance policies usually cost around 25% more than homeowners insurance policies because of the increased coverage it offers. This increased coverage is due to the fact that you do not live in the rental property. Which means you have to rely on your tenants to inform you when problems arise. For example, damage to your property from fire, storm, and water damage as a result of broken or burst pipes.
While these problems might be similar to those covered by standard homeowners insurance, there are unique features that homeowners insurance lacks which account for the increased risk of having tenants on your property.
Landlord insurance typically includes dwelling coverage, liability coverage, personal property damage, etc which are all modified to suit the special need of a rental property.
1. Dwelling Coverage
Just like homeowners insurance policy, landlord insurance covers structural damage to rental property such as damage to the walls, roof and other physical properties you might have. However, it does not cover damages to the personal belongings of your tenant.
Dwelling coverage is a very important part of your rental property insurance as it acknowledges the bigger risk of having tenants living on your property. It is also important to know the full details of your dwelling coverage policy to understand which perils are covered by your policy. Remember that, the more perils your coverage covers, the more expensive it will be.
2. Liability Coverage
This is another important part of landlord insurance. It covers the medical cost of tenants, tenants' visitors, and strangers who get injured on your rental property.
It also protects you if they decide to sue you as a result of the injury sustained on your property. You see, as a policyholder, you are responsible for whatever happens on your property which is why having this coverage in your landlord's insurance policy is a no-brainer.
3. Loss Of Rent Coverage
This is also known as loss of use coverage. It covers for any missed rent payment when your rental property is no longer habitable for your tenants. For example, if a fire damages your property and it becomes uninhabitable, loss of rent coverage can write you a check for the rent your tenants are no longer obligated to pay. This coverage can also pay for delayed or non-payment of rent by tenants.
However, you should check your rental property insurance before purchasing it. This is because loss of rent income does not always come with this insurance policy.
4. Flood Coverage
Many insurers do not include flood coverage in their rental property insurance. This means damage caused by a flood is not covered by this insurance policy.
However, water damage resulting from plumbing issues and broken pipes are covered here. So, to get extra protection from damage caused by flooding, it is important you buy this coverage.
5. Vandalism Coverage
This usually covers physical damage to the home. It also covers any theft that occurs while the rental property was vacant or undergoing repairs. Know that not all insurance companies offer this coverage as part of their landlord insurance. Some offer it as an endorsement.
6. Landlord's Personal Property Coverage
Landlord insurance also covers the personal items of the landlord present in the rental property. These include lawnmowers, furniture, appliances, and other items that make up a home. However, items that have no direct use on the property are not covered by this coverage.
In other words, if fire damages any personal item that directly serves the rental property, your landlord insurance will pay for it.
Additionally, landlord insurance does not cover the personal belongings of tenants. Which means if the same fire damages any personal property belonging to a tenant, it would not be covered by your rental property insurance.
And just like vandalism coverage, not all insurers offer this coverage as part of their landlord insurance. Some only offer it as an endorsement. So when purchasing landlord insurance, you may want to check if this coverage is included, especially if it's important to you.
7. Protection From Water-backup From An Outside Sewer
This coverage is usually bought as a separate policy. This is because water damage caused by a burst pipe is not grouped with damage resulting from the sewer.
8. Insurance For Tenants/Renters
Rental property insurance only covers the physical structures and personal items belonging to the landlord. You don't have to include this in your landlord insurance policy. Instead, it is something you should request from your tenants. Tenant insurance is a cost-effective way for tenants to protect themselves and their personal belongings in the event of a disaster or theft.
Filing A Claim
In the face of a disaster, make sure you're adequately covered before filing a claim for your rental property. Many insurance companies frequently look for ways to deny a policyholder's claim. So they won't hesitate to deny your claim once they discover it's not covered by your insurance policy.
When To Contact Your Texas Insurance Claim Attorneys
When things go wrong in your rental property, you don't need an attorney to file a claim especially when it is covered by your landlord's insurance policy. However, if you feel your insurance company is trying to take advantage of you or play down the value of your claim, know that there's always help available.
At the Voss Law Firm, our experienced attorneys here in Texas are passionate about helping you receive every compensation you deserve in the face of a disaster. If you need help, or if you have questions about an insurance claim that has been denied, delayed, or underpaid, you can learn more today by reaching out to us at 1-888-614-7730.
