ed the maximum liability coverage amount within your rental property or business insurance. If your policy has a liability limit of $1 million, and you need $1.5 million to cover your potential losses, you may need to purchase a personal umbrella policy.
Umbrella insurance is a general type of personal or business policy that offers an “excess” above and beyond what your underlying policies may cover. This is a smart idea for anybody who is exposed to increased financial risk, such as real estate investors and property owners.
The more your personal wealth increases and the more assets you own, either personally or through an LLC, the greater exposure you have to potential personal and premises liability. Essentially, the more assets you have, the more you should consider umbrella coverage as part of your real estate investing insurance strategy.
Your dwelling policy likely has a nominal amount of liability coverage, but that will only go so far in the event of a large claim. You may want to consider increased limits of $1 million or more in case the underlying limits are exhausted. This policy will stack on top of the liability limits on your landlord policy and can sometimes also sit over your personal home and auto policy.This policy will bridge the gap between maximum liability coverage limits of your existing insurance and your actual risk.
Other Types of Insurance to Consider
Aside from the listed coverages above, it’s wise to at least consider the following types of coverage, too, especially if you’re investing in multiple properties or working with others.
Builder’s risk insurance
Also known as course of construction insurance, this offers certain types of protections while your rental property is under construction or renovation. Many Steadily policyholders refer to this as renovation insurance or fix and flip insurance. Most standard landlord policies will not provide coverage for a property that will be vacant for an extended period, so this policy is designed to protect your investment until it’s ready to be sold or rented out.
Covered perils often include property damage due to perils like fire or vandalism. Financially, it can protect you if your property is damaged during the course of construction in a way that causes you financial loss.
Difference in conditions policies
Similar to flood coverage, many standard landlord policies don’t include coverage from natural catastrophes like earthquakes, wildfires and other “differences in conditions.” This is because offering insurance for damage or loss resulting from rare but potentially highly damaging events can increase an insurer’s risk exponentially. Consider adding these extra elements to your standard rental property insurance policy, especially if you live in a high-risk area for these weather events.
In the highest risk areas, these coverages may only be available through a state subsidized fund. You can talk to your Steadily agent about adding coverage for catastrophic events.
Insurance to Require from Your Tenants
While the coverage above will keep you and your property safe from liability and damage, you’ll want to consider making the following types of coverage mandatory for your renters to fill the gaps.
Renters insurance offers your tenant coverage for their personal property and liability for incidents occurring on the property. Unlike homeowners insurance, it does not offer dwelling coverage (but your landlord insurance will take care of that.) Renters insurance may also offer loss of use coverage, which will pay for your tenant’s additional living expenses they may incur if the property is uninhabitable due to a covered claim and the insured has to relocate temporarily.
Requiring this type of coverage for your tenants is a win-win for both parties. It will protect your tenant’s personal property, but may also indirectly assist you because it can provide the first line of liability defense for claims occurring on premises before it dips into the liability limits under your landlord policy.
Tenant legal liability insurance
Tenant legal liability insurance works like force-placed renter’s insurance but it is designed to benefit you as the landlord instead of the tenant. If the tenant does not provide proper renter’s insurance, you can enroll your properties in a tenant legal liability policy that will provide liability limits for a nominal monthly premium. Landlords often charge this monthly premium back to the tenant in the rent.
The tenant legal liability policies can include a small amount of coverage for the tenant’s personal property, but it is important to note that these policies are designed to benefit the landlord, not the tenant. A tenant will usually be better off purchasing a traditional renters policy versus accepting the force-placed tenant legal liability.
Pet insurance is a type of coverage that offers reimbursement for medical-related pet expenses. While this may seem like a strange type of coverage to require a tenant to carry, many landlords are making it standard as part of their agreement to allow a pet. Pet emergencies can be very expensive, and a large, unexpected expense can hinder a tenant’s ability to pay their rent.
Also, if your tenant’s pet somehow injures itself on your property, and your tenant doesn’t have pet insurance, they may try to recoup what they spend from you. Rather than tying up your rental property insurance policy with this type of legal claim, it’s still a wise idea to request pet insurance as part of the lease agreement. This type of coverage can fill gaps that could otherwise lead your tenant to make financially-driven decisions that could have a negative impact on you.
Protect Your Rental Property Investment with Steadily
Protecting your rental property investment with the right types of insurance will give you a leg up on risk management — an important part of any investment or business strategy. Getting customizable coverage from Steadily gives you access to coverage built for landlords, by landlords. Cover all your bases and then some with Steadily Landlord Insurance.
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