An insurance company slogan once famously claimed, “No one can surely predict the future, but we can protect it” – a pitch to give today’s property investors reason to think.
You never know when disaster might strike and you need to repair damage, cover a liability claim after a tenant’s injury or suffer a loss of income if a renter defaults on a lease.
The cost of landlord insurance can be 20% more than standard home insurance, and lenders will often insist on its purchase as a condition of issuing a loan.
Policies are specifically designed for properties that the owner doesn’t occupy and covers damage caused by tenants, vandalism, theft, and storms and fire. The cost will be influenced by the extent of coverage, the type of property, its age, condition and location.
As an investor or landlord, you may consider additional coverage.
A popular choice is limited liability to protect against any costs incurred as a result of an injury to a tenant due to a flaw with your property. For example, someone might slip on a loose step, need medical attention and later make a negligence claim against you.
Rent guarantee insurance is another level of coverage that will protect you financially if your tenant defaults on their lease and you’re suddenly left with no rental income.
It’s essential that you shop around and be clear on what the various policies exclude from their coverage. Insurance will not protect you against wear and tear or maintenance of your property.
As an experienced real estate agent in our neighborhood, I’ve seen many situations where claims have had to be made by landlords and investors.
If you’re looking to buy or upgrade a property for investment purposes, I would be delighted to assist you. I am familiar with the various trends in the rental market currently, and the style of properties quality tenants are seeking.
In the meantime, here’s a quick checklist to consider when deciding on the type of insurance coverage you might require. You should also speak to your financial adviser.
- Damage insurance – Basic landlord insurance should cover various forms of damage to your property, either by tenants or from the weather.
- Limited liability – Don’t get caught by a liability claim against you if a tenant injures themselves due to a problem with your property. This gets expensive if large medical and legal bills are involved. Speak to a broker about appropriate coverage.
- Rent guarantee insurance – Sometimes, a tenant will walk out on a lease and the property may sit empty for weeks. Alternatively, a property may be damaged by fire and the tenant has to move out. This coverage will compensate you for any loss of rent during such periods.
- Renter’s guarantee insurance – This policy protects your tenant and their belongings while they are in your property. It can also protect against any claims made against them. You can make this a condition of the lease.