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10 Essential Questions to Demystify Landlord Insurance

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Hi, my name is Max McClure, I'm the Chief Insurance Officer at Steadily. I want to extend you a warm welcome. Today, my goal is to demystify the world of landlord insurance through 10 essential questions.

What is landlord insurance?

Landlord insurance is a type of insurance that covers both your property and liability coverage against events that happen on that property. One of the main differences between a homeowner's policy and a landlord insurance policy is that a homeowner's insurance policy will actually deny or not cover claims associated with a tenant.

Why is landlord insurance a must-have?

Why is landlord insurance a must-have? As a real estate investor, any time I put together a business plan for a rental property, you do some sort of financial model that anticipates what your income on that rental property will be.

What you don't anticipate is major events, like a large uncovered claim or liability, something that happens on the property where somebody gets injured, where you have to pay out of pocket for those events.

And that is where insurance comes in to help you better manage your business and understand what your expenses are and feel good about the coverage that you have. Your landlord insurance policy is going to cover things like water damage, fire, is there, does somebody get injured on your property?

Those are things that you, as a landlord investor, are not going to want to pay directly out of pocket. You want to have confidence that you have an insurance provider who's going to cover those types of events so you can hit your margin and income targets on your rental properties.

What does landlord insurance cover?

What is a typical landlord insurance policy cover? The three principal coverages on a landlord insurance policy are going to be coverage for the building, coverage for liability events, and loss of rental income.

Let's say a pipe, a water pipe breaks in your home and causes the house to flood, or maybe a lightning bolt strikes the home and causes a lot of the electrical stuff inside the house to fry, that is where your property damage coverage will come in.

Let's stick with the example of a pipe bursting in your rental property that causes the entire building to flood. In that case, you're going to need a higher mitigation company to come out and they're going to dry out the property.

They're going to tear out all the parts of your rental property that are wet, like sheetrock or baseboard and flooring. And once that's done, you're gonna need to have a contractor come in and replace everything and put it back together.

During that period of time, your tenants are not gonna be able to live there and they're gonna have to move out, which means you'll be missing out on rental income during that period. Your loss of rental income coverage will reimburse you for income that you would have earned if the flood did not happen, or if the water damage did not happen, which is a very important coverage.

What additional coverages should landlords consider?

Some additional coverages that landlords should consider is sewer backup coverage, which is when water backs up through a pipe. Let's say it's the drainage pipe in the bathtub that can sometimes back up and drain into your home.

That's an additional coverage you'll need to purchase separately. You can also buy what's called extended replacement cost coverage, which means in the event of a total loss to your rental property, let's say if the whole thing burns down, you won't just get paid the stated amount of insurance on your dec page.

You'll actually get paid a percentage above that, like maybe it's... an extra 25%, an extra 10%, which will really help with the reconstruction costs if something like that were to happen.

How is the cost of landlord insurance determined?

Some of the key factors in determining how much your rental property insurance is going to cost is how big is the dwelling?

Where is it located? What kind of deductibles are you comfortable with? What state are you in? If you feel that your landlord insurance is too expensive, there are ways to mitigate the costs. So you can elect to have higher deductibles, which will result in a lower premium.

You can install a monitored alarm service in your home, which will also lead to a discount. In order to choose the best policy for your rental property or rental property portfolio, you first have to ask yourself, what is your risk tolerance?

If you are someone who wants to have a comprehensive, I'm not going to lose any sleep at night coverage, then there's an option for you. If you're someone who wants basic insurance and you don't want to spend a lot of money, but you understand that there may be things that aren't covered down the road, then there's also a product for you.

How can landlords choose the best policy?

A few things to look for when you're looking at your policy to make sure that you have your right coverage is, do you feel like the property limit amount is adequate to rebuild your property? You will likely know you probably bought this property or have an idea of what it would cost to rebuild.

So look at that amount and make sure you're comfortable with it. Another thing is look at the liability coverage and make sure the amount of liability coverage makes sense for your business. Some people have a large inventory of rental properties, and for those types of people, it generally makes sense to have higher liability limits with perhaps an umbrella sitting on top of all of those underlying policies.

And then other people that have one or two rental properties may be at $300,000 or $500,000 liability limit is adequate.

Can landlord insurance be customized?

Landlord insurance is highly customisable. You can have different coverages that may apply based on, is it a short -term rental?

Is it a long -term rental? What state is it offered in or what state are you in? There are a lot of additional coverages that you can buy in a landlord insurance policy that may not be automatically included off the shelf, but you can select to add those on.

So a common example of that would be the super backup coverage we talked about. That's not so. Something that's typically included, but you can add that on, which would cover like your commodes backing up into your house and needing to clean that up and replace anything that was damaged.

How do you file a claim?

Filing a claim with Steadily is very easy. You can text us, you can email us, you can even fax us if you're going to dust off one of those old fax machines. Once you file a claim, an adjuster will typically contact you in less than 24 hours and they will ask you about the claim, like what happened to the property, what do you know?

And based on that information, we may decide to do a virtual inspection of the property to assess the damage, or we may actually send somebody physically to your rental property to assess the extent of the damage.

We will build an estimate and then we will issue payment to you minus your deductible based on that estimate.

How can landlords lower their insurance premiums?

There are several different ways that you can reduce the amount of your landlord insurance policy.

One is do you have a monitored alarm service at that rental property? That'll definitely get you a discount. Do you have a professional property manager that manages that rental property? Steadily gives discounts for that as well.

In States where there is a lot of tornadoes and there's a lot of hail, the condition and age of the roof is also an important rating factor. The newer the roof, the better the condition, lower the cost.

Another way to save money is if you have more than one rental property and you put them all with steadily, we give a discount for multi-location accounts.

What are some common landlord mistakes?

Common landlord insurance mistakes would be not being an active participant in that insurance purchase.

Like your agent is your advocate, but nobody's gonna know your business and your portfolio better than you. So making sure you're conveying to your agent what your needs are. Like have you made changes to these rental properties over the last year?

Have you acquired new properties? Has something happened at those individual properties where you want to increase coverage or change your liability limits? So I think being an active participant in that insurance purchase is really critical to having the coverage that you make.

This is Max McClure, the Chief Insurance Officer at Steadily. I hope you enjoy demystifying landlord insurance. Subscribe to Steadily for more insights and reach out to Steadily today if you have any questions.

This post is for informational purposes only and does not serve as legal, financial, or tax advice. Consult your own legal, financial, or tax advisor for matters mentioned here. The information on this site is general in nature. Any description of coverage is necessarily simplified. Whether a particular loss is covered depends on the specific facts and the provisions, exclusions and limits of the actual policy. Nothing on this site alters the terms or conditions of any of our policies. You should read the policy for a complete description of coverage. Coverage options, limits, discounts, deductibles and other features are subject to individuals meeting our underwriting criteria and state availability. Not all features available in all states. Discounts may not apply to all coverages. Steadily is not liable for any actions taken based on this information. If you believe any of this information may be inaccurate please contact us.

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