Boundless Management

It is difficult to manage property and there are many different reasons people choose to become landlords. For starters, a rental property is a good investment to include in any portfolio. Or maybe you’re what is called an accidental landlord, meaning you never intended to rent your property, but bought a new home and have had difficulty selling your old one. You may have finally purchased that long awaited vacation home, only to find that the only way to cover unexpected expenses is to bring in short-term renters. Whatever the situation, you will find being a landlord presents unique insurance needs.

How do I know when I need landlord’s insurance?

If you’re only renting out your property for a few weeks a year, your homeowners policy should provide sufficient protection. However, when rentals become more than occasional, additional coverage will be required. Four weeks is generally a good rule of thumb.

If you are residing in the same dwelling as your tenants, you can acquire a homeowners policy tailored to that situation. But, when you are renting out a separate home from the one you are living in, then you must have a separate insurance policy as well.

You may be tempted to just stick with your existing homeowners policy and let the chips fall where they may, but this is very risky. In the event that you have to make any sort of claim, it’s very likely that you will be denied coverage. It’s much better to be safe than sorry, and to be up-front with your insurance company.

What type of landlord’s insurance is right for me?

Policies can go by several names, but in general are called dwelling policies, and are sorted by three categories:

• DP-1: This is the most basic policy, and covers calamities such as vandalism and damage caused by fire.
• DP-2: This is a broader policy that covers your home from wind and hail damage, as well as vandalism and fire. It even covers you in the event of a car colliding with your home.
• DP-3: This is also referred to as an open peril policy, which means that unless a peril is specifically excluded from your policy, it will be covered in the event it occurs.

Most insurance agents suggest opting for a DP-3 policy for the simple reason that a DP-1 will only pay out the actual cash value of the property, while a DP-3 will provide for its replacement cost.

What other areas of coverage should I consider?

Policies are also available for loss of rental income in the event that your rental property should ever have to be vacated for any reason. Many landlords believe if their unit has to be vacated for repairs or due to eviction that this is a covered loss. They find to their dismay that this is not the case.

Landlord protective policies are another option to consider, so that an equipment malfunction, such as a furnace breaking down, doesn’t turn into more of a nightmare than it already is.

Be sure to have sufficient liability coverage. You don’t want to find out your coverage is inadequate if the time comes that you need it.

Insurance, and especially rental property insurance, can seem like a confusing maze of mumbo-jumbo, but if you break it down into little bite-sized morsels, and take it step by step, it’s really not so bad. With the help of seasoned professionals at your side, it’s easier still.