What Kind of Insurance Do I Need for My Rental Property?
Congratulations on becoming a property owner! The journey has certainly been nothing but easy. Assuming you did your due diligence, you’ve now embarked on your journey to earning passive income for many years to come.
In fact, do you know which industry produces more millionaires than any other? You’ve guessed it right, it’s real estate!
Becoming a property owner is half the battle, however. To win the other half, Derek of DawsonPropertyManagement.com says, you need to properly understand the nuts and bolts of a successful rental business. This includes things like knowing how to find and screen prospective tenants, understanding all landlord-tenant laws, and knowing how to handle tenant requests on time.
But while all these seem pretty obvious, there is one thing that many new property owners fail to take seriously – landlords’ insurance.
One important aspect of becoming a successful landlord is knowing what kind of insurance you need for your rental property. If this is the information you came here looking for, you’re in luck. Here is everything you need to know about insuring your rental property.
Novice landlords getting started in the rental management space usually assume that their homeowner’s insurance will cover their property against potential calamities. That’s a rookie mistake!
A homeowner’s insurance will cover your home and its contents up to a defined limit. It won’t offer protection to rented premises – plain and simple. If you own a rental property, what you need is a landlord insurance.
A landlord insurance will only cover damage to your rental property resulting from unforeseen circumstances including fire, storm, earthquake, vandalism, and theft.
The cost of the policy depends on various things. These include:
Generally speaking, though, the most basic landlord cover will cost you anywhere from 20- to 30% more than comparable homeowner’s insurance in your area.
A good, comprehensive insurance cover will cover you against:
While the aforementioned are basic protections, some companies will also offer additional ones depending on your specific needs. These include emergency coverage, flood insurance, and guaranteed income insurance.
No,you don’t. Just like the name implies, a renters’insurance is responsible for insuring your tenant’s property against damage or theft. It also often covers damage to a tenant’s belonging from disasters like vandalism or fire.
Many renters mistakenly think that their landlord is responsible for covering their belongings. But nothing could be further from the truth. A landlords’ insurance only covers the structure itself and not the tenant’s personal belongings.
As a landlord, you can require your tenants to obtain a renters’ insurance as part of the leasing process. In fact, most landlords do. Just require your tenant to provide proof of the renter’s insurance prior to them signing the lease agreement.
Just like the landlords’ insurance, the cost of a renters’ insurance also depends on various factors. Generally, it depends on location and how much coverage a tenant wants. But a basic policy - $30,000 of personal property coverage,$100,000 of liability, and a $500 or $1,000 deductible – should only cost about $10/15 a month.
There you have it. Everything you need to know about what kind of insurance you need for your rental property. Insuring your property against common perils is the only way to ensure you continue earning consistent rental incomes for many years to come.