If you are thinking of renting out your residential property, you must look into landlord insurance. The homeowners' insurance will not cover the rented property. It is a very common rookie mistake for first-time landlords. And they might get in trouble because of that minor mistake.
In simpler words, homeowners' insurance does not cover a property that you do not live in. This means that you need landlord insurance for a property you are deciding to rent out.
Landlord insurance coverages include property damage, landlord liability protection, and rental income loss. You can also buy extra coverage. This will include expenses such as construction costs and eviction costs.
Do You Need Landlord Insurance?
Renters are not held responsible for general losses where the tenant was not at fault. These scenarios include:
- When a person is injured on your property,
- When a flood or forest fire damages your house,
- When an appliance malfunctions.
These accidents can leave your pockets empty. This is where landlord insurance can help you out.
What Will Landlord Insurance Cover?
The insurance policies are quite flexible and come in all shapes and sizes. First, you need to consider what kinds of protection you will need. Buy accordingly. Generally, a landlord insurance policy will provide the following core protections:
Rental Default Insurance
You cannot rent out your property if it is inhabitable. This could be because of mold, rat infestation, or termites. This feature will provide rental reimbursement for some time.
It is applicable when there is any damage caused by natural disasters, theft, vandalism, gas, or electric malfunction. This feature will cover the cost of damage caused to the house or its furnishings. Do not get a policy that offers the actual cash value. Instead, get a policy that provides replacement costs.
The tenant might get injured during regular property maintenance. Liability protection will cover the legal or medical expenses. This may include architectural collapse or slippery walkways.
The landlord liability protection policy also covers costs for legal action taken against the tenants. Liability protection is applicable when:
- Your tenant is not evicting the property,
- They have damaged your property,
- There is unpaid rent to pursue.
The tenant can also report a claim against you. for instance, you have violated your legal obligations. Liability protection will cover any defense expenses in this case.
It is also helpful when you are planning to evict your tenants. An average eviction takes at least eight weeks. During this time, you will not receive any rent. Their legal advice can save you your time and, thus, your money.
Landlord Legal Costs Coverage
The landlord insurance will cover the legal expenses if:
- Tenants have refused to pay the rent,
- Tenants have damaged your property,
- Squatters have occupied your property,
- You wish to repossess the house from tenants, but they have refused.
This coverage will be applicable in case the renters have damaged your property and it needs repair work or replacement. However, the damage should be more than regular wear and tear. Moreover, the damage expense must exceed the limit determined in your insurance contract.
This is required when the tenants refuse to evict the house on your request. You can report a claim depending on the reason you want them evicted. For example, the renters are not paying rent for a few months and are not picking up your calls. Or if they have caused huge damages to your property or any pre installed furnishings.
When someone has occupied your property illegally without your permission, it is called squatting. If you decide to take legal action against the squatter, your insurance policy might also offer you expert legal advice.
If you have added tenant default cover when purchasing your insurance policy, you can recover up to £50,000 of rent. This coverage applies when your tenant is not regular with the rents and has missed several months of payments.
What Will Not Be Covered?
When purchasing the policy, do not forget to inquire about the limitations. Of course, the policy will have its benefits and constraints. Also, keep in mind that the policy will vary slightly between different insurance providers.
If you reported a claim more than ninety days after the incident, the policy would not cover the expenses. Similarly, any cost incurred before the agreement will not be included in the coverage.
- Some other limitations are any issues related to:
- Rent tribunals
- Rent arrears,
- Property damage, where the damage cost is less than the defined limit in the policy.
Insurance providers have policies designed with different levels of coverage. Keep in mind to ask a lot of questions and gather all information on all the available products. The company may have a more comprehensive policy available that would fit you better.
How Much Will It Cost?
The National Association of Insurance Commissioners (NAIC) sets insurance standards. According to their 2019 report, landlord insurance costs 15% more than the homeowners' insurance on the same property.
However, if you rent your property for a more extended period, the policy will be comparatively affordable. This is because short-term tenants are less likely to complain about maintenance issues. They might not even be able to understand all the problems in the house in a short time.
There are many deals you can benefit from. You may get a discount if you have a good claim's history, or are insuring multiple properties.
One thing to keep in mind is that the landlord insurance will not cover any expenses for the renter. These costs can include property damage, medical, or legal expenses. Therefore, as a landlord, you can advise your renter to get the renter's insurance.
If you are looking to rent your property, do not assume your homeowners' insurance will cover any damage to the house you are not living in. Do not be afraid to ask your insurance provider if they will cover the landlord's insurance.
Choosing the right insurance policy can save you a lot of headaches. This will also be crucial for a pleasant experience with your tenants.
If you're looking for one, Steadily offers many landlords resources related to insurance. Their excellent services mean that you have a smooth journey throughout.