HAs a landlord, insurance is one of your vital business expenses. Your landlord insurance helps protect your property from natural disaster, unexpected malfunction, and even the negligent actions of tenants who just aren't taking good care of your property. Insurance, however, can quickly become expensive. Try some of these strategies for cutting your insurance costs without missing out on vitally-needed coverage.
What is landlord insurance, and why do I need it?
Landlord insurance is specifically designed for people who own properties that they rent out. It covers the potential losses associated with those rental properties. Landlord insurance usually offers coverage for the building itself, rather than the contents. You may, however, choose to add coverage for any property inside the home that you own.
Landlord insurance can come in handy in a variety of scenarios. It may cover:
- Loss of rental income in some scenarios, depending on what type of coverage you select
- Damage to your property
- Theft
- Liability costs if someone suffers an injury on your property
Carrying landlord insurance is critical to protecting your asset. You may have quite a bit of money invested in your rental property. When disaster strikes, insurance can help you avoid immense financial losses. Typically, it is not required by law; however, if you have a mortgage on your rental property, your lender will require you to carry landlord insurance to help protect their portion of that investment.
What types of commercial landlord insurance are there?
How much commercial landlord insurance you have, and the type you carry, may depend on the type of disaster you want to protect against.
Liability Insurance
Liability insurance is designed to provide protection if someone suffers a serious--or not so serious--injury on your property. For example, suppose a visitor to one of your rental properties slips and falls on the stairs and suffers serious injuries. Later investigation uncovers a faulty handrail, which could leave you liable for the visitor's injuries. Liability insurance can help provide compensation for the injured party without impacting your personal finances. Likewise, if you rent out a multi-family property, and a malfunction with the hot water heater causes serious burns to one of your residents, you may need liability insurance to help cover those costs.
Property Insurance
Property insurance provides protection against damage or loss to your property. For example, suppose that a natural disaster tears through your area, destroying your building. Property insurance could help provide compensation for those damages and help you with the financial cost of repairs, which could get your building ready to rent again much sooner than if you have to scrape up the funds to take care of those costs on your own. Likewise, if you own a multi-family property and suffer accidental water damage, your property insurance can help you manage the cost of those repairs.
Property insurance for landlords breaks down into several categories.
Insurance on the Property Itself
As a landlord, you cannot just take out homeowners insurance coverage, particularly on a large, multi-family dwelling. The contents of the unit typically do not belong to you, and you have no need to insure them. Your property insurance will cover any damage to the property, minus the amount of your deductible.
Flood/Water Coverage and Other Riders
On many insurance policies, water or flood damage is its own separate rider. If you want to be sure you have coverage for water damage to your property, make sure you speak to your agent about adding that vital coverage. You may also need to add a rider to your policy that covers other acts of nature, including storms, snow, or heavy winds.
Fair Rental Income Coverage
If a disaster prevents you from renting out your property, can you afford to cover the cost of the mortgage--not to mention the other costs potentially associated with maintaining that property? Many landlords rely on that rental income, both as a source of income and to keep up with the property itself. Fair rental income coverage can help you protect your investment if your unit has to stand empty for a long period of time.
What major nuances do multi-family landlords need to be aware of?
As a multi-family property owner, there are several things you need to take into consideration when you purchase insurance on your properties. Understanding available coverage and the nuances to that coverage can make a huge difference in both how much you pay for that insurance and how much you can rely on it in the event of a disaster.
Prioritize Admitted Coverage
Honeycomb Insurance offers "admitted coverage," which is regulated by the state. That insurance offers better coverage for the landlord than non-admitted insurance, which is not regulated by the state. Admitted coverage may also be a lower-cost policy for landlords than non-admitted coverage. However, admitted insurance companies may also require a higher standard of maintenance in the properties they cover than non-admitted insurance coverage. Do you have a high standard of maintenance across your properties--or even just the property you're trying to ensure? You may want to look into admitted insurance policies, which could offer a less expensive option for the coverage you really need.
Consider Small Claims Before Filing
Your property insurance can offer a great deal of assistance in covering everything from minor incidents to major disasters. However, you may want to think twice before you move forward with a small claim. The cost of your insurance, regardless of which carrier you use, will increase for between three and five years after you file even a minor claim--and that increase may ultimately cost more than the repairs you had to make. Carefully evaluate the potential cost of a repair before you move forward with an insurance claim--and make sure that it's worth the cost of that increase.
What landlord insurance coverage can you live without?
Many landlords seriously consider how they can cut costs when the time comes to select landlord insurance on their properties. There are some types of coverage you may have to have, depending on your circumstances.
You may have to have insurance coverage if you have a loan on the property.
Most lenders will require you to carry property insurance, since that property insurance will help protect the lender's investment in your property. Your lender may dictate how much coverage you have to carry, including specific types of coverage or general coverage on your property. That does not necessarily mean, however, that you have to have every type of coverage for your property. Are you considering how to save money on landlord insurance? There are several things you may be able to omit.
The amount of your deductible may change the cost of your insurance coverage.
If you have a high deductible, you may be able to pay less on your insurance coverage each month. However, you should carefully consider whether you have the funds on hand to cover the cost of that deductible in the event of an emergency. If you don't have those funds, you may want a lower deductible so that you won't find yourself scrambling if a disaster hits your property.
Check your safety features.
Safety features matter when it comes to landlord insurance! Great smoke and carbon monoxide detectors, an effective security system, updated electrical systems, and other additions to your property can help bring down your insurance. Not only that, renters are often excited to find properties that offer those amenities, so you may find that adding them also increases interest in your properties.
Consider what types of coverage you need.
What do you need your landlord insurance to cover? For example, in some areas, you may not have flood insurance included with your landlord insurance automatically. If you want to add it, you may find yourself paying for an expensive rider. Carefully evaluate the likelihood of flooding in your area and talk to an experienced insurance agent to learn more about what type of coverage you really need.
Keep up with maintenance.
Maintenance matters when it comes to your rental properties. If you allow your properties to fall into disrepair, it can prove incredibly difficult to get them back up to snuff--and you may find yourself struggling to take care of all the damage that adds up over time. Regular maintenance can also help decrease your insurance costs, since maintenance, including fixing up leaks and making sure that you fix tenant issues quickly, can decrease the need for large expenses that may hit all at once.
Landlord insurance can be comprehensive and affordable.
Choosing the right insurance for your rental properties, including the coverage you need for potential disasters that could impact your property and your income, is critical. (By the way, need help understanding some of the terms in this guide? Check out our ultimate commercial residential insurance dictionary). However, that doesn't mean that you have to break your budget on your landlord insurance. At Honeycomb Insurance, we offer solutions that can make your landlord insurance both comprehensive and affordable. Contact us today to get an immediate quote and/or speak with one of our experts about the right coverage for your insurance needs.
