Just purchase rental property...insurance coverage?

Question

I just recently purchased a single family residence as an investment. It is currently rented.

Besides the 100% replacement cost, what are some important coverages to look at from coverage ABCDEF..etc???

Answer 1

Most rental policies only provide coverage A....and most only have fire & wind as covered perils. Unless you have detached garages or storage buildings(which are uncommon with rental properties), you shouldn't need any coverage B. You definitely won't need any covergae C or D because you won't be keeping any personal belongings at the house and you won't have to relocate if it burns down. Depending on your state laws, you may or may not need E and F. In my state, you don't have to carry them because there is no joint venture law that could make you liable it someone gets injured on the property.

You won't find too many companies who will write the same insurance coverage as a regular house on a rental property. Just remember, you don't want to pay out so much each year in premiums that you severly cut your profits. And like the previous responder said, REQUIRE  your tenants to carry renter's insurance. Make sure you put it in the lease agreement.

Answer 2

I am a landlord in Malibu California.  I NEVER let a tenant rent my place unless they show proof of tenant liability insurance before they move-in.  If they have a guest come and fall etc.

hen their insurance gets sued first.  this is very important!!!

Answer 3

You DO need coverage C, which would be loss of rents! What if you had a fire loss and it took you 6 months to repair - wouldn't you want the loss of rents for 6 months covered?

Try to buy as much liability as you can - $1,000,000 is recommended, if you can get it. Tenants can sue you too, so that is why higher liability is recommended.

Start with your homeowner company and see if they could handle this and if not, see an independent insurance broker.

Answer 4

sounds like you are pretty aware of what you need.  of course you want the dwelling covered, you also want business income.  this means if something happens to your property (ie a fire) and the tenant cannot live in it until it is repaired, you will not loose your rental income.  you want that liability coverage and i write my clients with at least $500,000 for rentals.  having your lease state your tenants will carry insurance is a great thing, but you will NEVER know if they are or not and you ALWAYS want to protect yourself.  liability is the CHEAPEST part of the policy, so carry it!  if you own your primary home, you can extend the liability from it to your rental property if you want and it wont cost much.  i write my clients with rentals on a commercial package policy.  the coverage is better and the rates are a LOT lower this way.  most packages will include the coverage for your property in the home like appliances.

Answer 5

The standard policy for renetal properties is called a Dwelling/Fire policy.  It covers only the property itself, not any of the tenant's belongings.  The usual hazards are covered such as fire, wind and storms, hail, lightning, etc.  Earthquake coverage is an added rider in much of the country, especially in earthquake prone areas such as most of California or the New Madrid fault in parts of Missouri, Arkansas and Tennessee and even South Texas where the Hill Country meets the coastal plains.

Flood coverage is separate just as it is with Homeowners Insurance policies and the coverage cost is the same for rental properties.  Even if the property isn't in a flood plain it's worth considering.

As noted earlier, the tenant's belongings are not covered although the liability portion of the coverage -- which is often added on to YOUR home's policy by the way -- will cover their property against YOUR personal malfeasance but not Acts of God.  For this reason I always insisted that my tenants carried their own insurance coverage.  Even if you don't actually verify their coverage, having that in your lease can save you a LOT of aggravation.  It certainly did for me when a sewer line collapsed and backed up into the home causing massive damage to the home and the tenant's property!