By: Andres Dominguez III
I spent years mastering landlord insurance, but I’ll break it down for you in minutes. The last thing you need is an insurance policy that leaves you underinsured, exposed, and lacking essential coverages. Our agency works local, regional, and national carriers to find the best combination of coverage and pricing for your unique situation. In this article I’ll break down the 3 most important coverages you should look for in a proper Landlord Insurance Policy.
1- Dwelling Coverage
The dwelling limit is the meat and potatoes of an insurance policy. This limit is the maximum amount your carrier will pay to rebuild your property in the event of a total loss. Imagine your property burns down and you have to rebuild it from the ground up. The dwelling limit will pay for the materials, labor, and cost of construction to rebuild your property.
We have not seen this level of inflation in many years. This means that the cost to rebuild your property has also increased due to increased cost of materials and labor. And your current policy may not have enough Dwelling Limit to rebuild your property. We advise our clients to not take this coverage lightly because there is a Coinsurance Penalty that insurance carriers will charge you if your property is underinsured. More on Coinsurance Penalty in this article: How Does Coinsurance Work in a Commercial Property Insurance Policy?
2- Loss of Rents
This often overlooked coverage is crucial at the time of a severe claim. Another name for this coverage is “Fair Rental Value.” This coverage will reimburse you for lost rents due to a covered peril. Example: Imagine your rental unit has a tragic fire that burns the property to the ground. During the period of restoration while you get the property rebuilt, this coverage will step in and reimburse you the rents you would have received during this time. This coverage will continue to pay your lost rents until the home is repaired or rebuilt or the policy limit is exhausted (whichever comes first). That is why we emphasize the importance of reviewing your policy to ensure this limit is adequate.
3- Liability
The United States is the most litigious society in the world. We spend roughly $310 Billion a year on tort litigation. It is more important than ever to have sufficient liability limits on your Landlord Policy. Some carriers maximum is $500K, and some will go up to $1M. Every situation is unique, however, we usually suggest going for the highest limits your carrier offers.
***Bonus–Renter’s Insurance
A Renter’s insurance policy provides a layer of liability insurance between you, the tenants, and their visitors. If the tenant’s mother-inlaw drops by to visit, trips and falls, the renters insurance may respond before dinging your Landlord Policy. This is especially important if your tenant has a dog. The average dog bite claim across the nation is $50,000, make sure your tenants policy does not limit dog bite claims or exclude certain breeds. We recommend you require your tenants to carry at least a $300,000 limit of liability coverage. More on Renter’s Insurance in this article: Are You Requiring Renter’s Insurance?
Call or click for more information on how to best protect your rental properties or any questions you have about Landlording: 801-262-1551. We love helping our customers be successful Utah landlords.