If you are getting ready to purchase some rental properties, one thing you will need to do is purchase insurance for the properties. While your insurance will not have to cover the belongings of your tenants, it will need to cover the actual units themselves. In addition to basic types of insurance coverage, you may also want to look into some optional types too. Here are several different types of insurance products you may want to consider investigating.
Basic Insurance Coverage
Basic insurance coverage is designed to protect your structures against problems that can result from fires and natural disasters. These policies will provide coverage if a storm damages your units or if a fire consumes one of them. A basic policy will usually cover the costs of damages due to vandalism too, and your policy should offer liability coverage. Liability coverage is designed to protect you from lawsuits that may occur if someone gets injured on the property.
When you purchase basic insurance coverage, there are several key things you should know:
Always purchase a policy with guaranteed replacement coverage – Guaranteed replacement coverage is designed to reimburse you for the costs it requires to rebuild your properties if they are destroyed. This type of coverage does not take depreciation of a building into consideration when calculating the amount you will receive from a claim.
Add flood insurance to your policy – Flood insurance is often considered a basic type of insurance coverage, yet it is not a type of coverage that you will automatically get in all cases.
Make sure your policy offers enough coverage – You should also carefully scrutinize the maximum amounts of coverage your policy offers for all the things it covers simply to make sure you are fully protected.
Your policy premiums will depend on the types and amounts of coverage you have, and they will rely on other factors too, such as geographical location, number of units, and the ages and conditions of the units.
Loss Of Income Insurance
A great extra type of insurance coverage for landlords is called loss of income insurance. Imagine if several units were destroyed by a fire and had to be completely replaced. During this time, you would not have the income coming in from the tenants that had lived there, yet you would still be required to pay your mortgage payments for the units. This could put you in a bad financial place, unless you had loss of income insurance.
With loss of income insurance, your insurance policy would reimburse you for the loss of income you experienced from this. There are limits with this, but it could help tremendously even if the insurance does not cover 100% of the rental income you lose.
Security Deposit Insurance
Security deposit insurance is not a type of insurance you would buy as a landlord, but it is a type you could encourage your tenants to purchase. With security deposit insurance, a tenant would buy a policy with the insurance company instead of paying a security deposit. This type of insurance can benefit you and the tenant, and it is becoming very popular today.
For the tenant, he or she will benefit by paying a smaller amount. To purchase security deposit insurance, the tenant will usually pay around 20% of the monthly rent for the apartment. For example, if the monthly rent is $800, the security deposit insurance will cost around $160. This is a one-time fee, but the tenant will not receive it back. The benefit of this is that the tenant can move in for a cheaper amount up front.
For the landlord, you will receive benefits too. This insurance policy will cover up to a certain amount of repairs you may need to do when the tenant moves out. Normally, these policies provide enough coverage that you will not have to worry about suing the tenant for damages after he or she moves out.
If you are about to become a landlord, you will need insurance. To get the right types and coverages, contact an insurance agency today.