Owning a rental property can be financially lucrative, and many people earn a great primary or secondary income stream from their real estate investment activities. There are also other benefits associated with tax advantages, property appreciation, the ability to leverage your investment and more. However, there are risks associated with being a landlord that can dramatically impact profitability. Everything from property damage caused by Mother Nature to liability risks if someone is injured are on your property need to be considered. The good news is that insurance coverage is available for short term and long term rental to provide financial compensation for most types of risks that you may face as a landlord. With analysis about what insurance do landlords need, you can contact your insurance broker to update your insurance portfolio.
Property Insurance
Any real estate owner who owns a developed property, as opposed to raw land, needs to purchase property insurance. This is coverage that pays to repair or replace damaged structures on the property, and it can include coverage for everything from a primary house or office building to parking lots or driveways, fencing and more. Property insurance typically provides coverage for all types of damage inflicted through natural weather events as well as fire, theft, vandalism and more. Typically, you will pay a deductible when you file a claim, and this deductible may be as much as one to two percent of the face value of the coverage. Because the value of the land is not insured and is not included in the face value of the coverage, the coverage amount does not usually equal the total value of the entire property. Keep in mind that this type of coverage is typically required by a mortgage company if there is a loan on the property.
Loss of Rents Coverage
Landlords and real estate investors typically rely on their property to generate enough income to pay the mortgage payment and other related overhead on the property. A savvy investor or property owner may have the financial means to pay the bills when the property is vacant for a few weeks in between lease terms. However, when a property is severely damaged, the property may immediately become vacant without notice. Furthermore, it may sit vacant for months while it is being repaired in a serious event that causes significant damage. After it is repaired, it may take several weeks or longer to find a suitable tenant to move into the space. This can create financial hardship for a landlord. Loss of rents coverage is typically purchased in conjunction with property insurance, and it reimburses the landlord for at least a portion of the rental payments that were lost as a result of the damaging event.
Liability Insurance
Liability is not a matter that most people think about every day, but it can result in significant financial loss for a property owner. The public liability insurance definition states that this is coverage that reimburses other parties if they are injured or suffer other losses that are the result of the negligent or intentional actions of the landlord. For example, landlord insurance public liability may reimburse a tenant who was injured because the landlord failed to take steps to reasonably maintain the property in a safe condition. Liability expenses may include medical bills, legal expenses, lost wages and more that are paid to the injured party. Some people may want to know how much liability insurance should a landlord have. Because each matter may create different expenses for a landlord to contend with, it may be advisable to ask your insurance agent for a reasonable amount of coverage for your property’s needs.
While there are numerous risks associated with owning a rental property that landlords may face, the benefit is that you can insure yourself against these risks. In fact, real estate offers many investment benefits that other investments do not have, and it also is one of the only investment types that you can insure against losses. It is wise to speak with your trusted insurance broker about the types of insurance coverage that landlords should purchase and to get a quote for coverage today. Because you never know when a devastating event will occur, you should make an effort to purchase insurance today.
