Sleep Easier With Landlord Insurance for Your Renters
A great way to make money is to begin to rent out your property as a vacation home. You may have real estate goals to have the potential to make a lot of money, depending on the location of the property, on renting your property a week at a time. Even if you want to rent your property for a longer period of time, you can still make a large amount of money.
When you have decided that you want to start renting your property, you want to make sure you have all your bases covered. You can make several mistakes, especially if this is the first time you are renting out property. One of the top items you need to be aware of is landlord insurance. Before proceeding any further with renting, continue reading this article to find out the details about insurance.
What is Landlord Insurance?
Landlord insurance is not the same as homeowners insurance. Your homeowner's insurance will not cover you when you decide you want to rent out a property. It does not matter what type of property you want to rent; you should still consider this type of insurance. If you are not living in a property, your homeowner's insurance will not cover the property if something were to happen to it.
A renter is not responsible when something happens to the appliances in a rental.
They are not responsible if someone has an accident on the property.
If there is a natural disaster or someone robs the property, the renter is also not responsible.
You, as the landlord, are the person that is responsible for the cost of the damages.
Landlord insurance generally covers damage to the property and any loss of income that happens if the property cannot be inhabited. You can get other riders added to the typical insurance coverage you buy. The good news is that there are many different types of landlord insurance that you can purchase, and you can make it fit your needs.
What Does It Cover?
A landlord insurance policy that is comprehensive covers three major areas.
This is the coverage that protects you from natural disasters, fire, vandalism, malfunction, and even tenants that destroy the property. This protection covers the property and the furniture in the property. This coverage can be paid out in the actual cash value of the items, replacement costs, or a predetermined amount of money.
If something were to happen, such as an infestation of pests or mold, that prevents your renters from being able to live there. This part of the insurance coverage can give you rental reimbursement temporarily to give you income if your renters cannot live in the property.
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It covers any legal or medical costs that may occur if your renter or someone visiting your renter is injured while at your property. This can include an issue such as a snow-covered or icy sidewalk or something happening to the structure of the building.
You may see that the insurance options you are given offers you different coverage levels with varying costs.
Can I Add More Coverage to the Insurance?
When looking into landlord insurance, you know the standard options you will receive. That may not seem like enough coverage, and you may want to see what riders you can add to your coverage. While these riders are not as important as the insurance's key components, they are additions of which you should be aware and understand. These additional riders may save you money in the long run.
Guaranteed income insurance
The first one of the optional riders available to you, this rider covers a time when your renter may not be able to pay all of the rent. Even if your renter can only pay a portion of the rent, this rider covers the rest of the rent.
Flood insurance
A typical insurance policy does not cover flood damage as part of the natural disaster portion of the coverage. If your property is in an area known to flood, you may want to consider this rider.
Emergency coverage
It protects you when there is some unexpected problem in the house, such as being locked out of the house or an appliance problem. This coverage pays for the travel costs for you.
construction expenses rider
If you have to pay for construction to bring your property up to code, there is an additional construction expenses rider to cover this.
What is the Liability Clause?
The liability clause protects you when someone files a lawsuit against you when something happened that caused damages for your renter. As a landlord, you can be sued by a renter when they have financial problems, injury, emotional problems, or death. For a lawsuit to have a positive outcome for the renter, you have to be responsible for the damages that occurred. Some of the most common reasons a renter may sue are an injury from a slip and fall, damage from a robbery, or damage from problems within the house. You are responsible if your negligence caused the problem.
Keep everything safe and in check
To protect yourself from being considered negligent, you want to make sure your property is safe and in working condition. You should make sure the entire property is well maintained and in good condition. You want to make sure that your property is up to code and check on that frequently. You should have someone inspect your property regularly to make sure nothing can cause harm or injury. You want to check the property for radon, lead paint, and carbon monoxide. You want to make sure that the property is checked every season for any potential hazards. If a maintenance concern comes up, you want to fix it quickly.
Is This Type of Insurance A Legal Requirement?
You are not legally required to have landlord insurance. It is not a requirement of your mortgage lender for you to have this type of insurance. It is, however, a smart idea. If you are managing properties and collecting rent from them, you should have this type of insurance. You never know what is going to happen, from storms to fires to theft and vandalism.
This type of insurance helps you protect yourself from the unexpected. If any of these events happen to your property, you will have to pay for it out of your own pocket. If you have this type of insurance, you can have some protection from paying out of pocket. Just as a reminder, your homeowner’s insurance will not cover a property in which you do not reside. If you have other properties, you must protect them and yourself with landlord insurance.
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Is This Insurance Tax Deductible?
Once you have decided to rent property to earn money, you have made it into a business. As with any business, there are many tax deductions available to you. Many tax deductions can be taken when it comes to the cost of running your business. The items you deduct must be costs that you pay to run your business, so they must make sense.
In this case, landlord insurance is important to running your business, and the costs can be deducted. If you are not sure which items can be deducted within the law, you should seek counsel from an accountant or other tax adviser.
How Much Should I Expect to Pay?
As with all insurance, the amount you pay is directly related to several factors.
The first of which is how much coverage do you have from landlord insurance. You will most likely be quoted rates that range from just a few hundred dollars a year to several thousands of dollars. If the property you are renting is something you plan to sell in the future, you can expect to pay about 25 percent of the cost of your homeowner’s insurance.
There are other factors that impact how much you will pay for your insurance premiums.
Those factors include the actual location of your property and any risks that impact that area. For example, if the property is in an area known to flood or hit by hurricanes, your premiums will be higher.
The size of the property you want to insure will impact the amount you pay.
The number of properties you want to insure makes a difference in the cost.
The age and condition of the property make a difference in the price you will pay.
If there is a pool on the property or in the complex, or if you let your renters smoke on the property, this will drive up your insurance price.
Some features may keep your costs lower. If you have sprinklers, a security alarm, or a gate to prevent just anyone from entering the complex, they all can reduce the price.
How is This Different Than Homeowner's Insurance?
We have mentioned several times in this article that your homeowner’s insurance will not cover any rental property you have. Homeowner’s insurance only covers a property in which you are living. If you do not live on the property, your homeowner’s insurance will not cover it. It is important to understand exactly what your homeowner’s insurance will cover.
It may cover any personal property that you have in the rental. Depending on how you rent your space, you may have personal property in it. If you rent your property for only one week at a time, chances are you have furnished it or have your own property in it. Your homeowner’s insurance may cover that property. If the property you are renting is your home where you live and you are renting a room or a building on the property, your homeowner’s insurance may cover it.
You want to make sure you fully understand what it covers. You also want to make sure that you have enough coverage. Even if your homeowner’s insurance covers you, you may need more. Most likely, you are going to need landlord insurance or some other home building insurance to provide you extra protection.
Do My Renters Still Need Renter Insurance?
Depending on the state in which you live, it may be unlawful for you to require your renters to have renter’s insurance. In some states, however, you are allowed to make it a requirement of your rental contract. Those states that allow you to require renter’s insurance may only be allowed for those that have a higher income.
You first need to determine the law within your own state. If the state in which you live does not make it illegal for you to require your renters to have insurance, then you can ask or require them to get renter’s insurance for their own protection.
Conclusion
Many think of insurance as an unnecessary expense because you only use it when you need it. The reality is, you may never need it. This means that you will have paid for your insurance premiums for no reason. It is true that we buy insurance hoping that we will never need it. This is true for every type of insurance that we buy, whether for a car, a house, or even for your mobile device.
Even if you feel that you do not need insurance for the property you are renting, you should think again. Keep in mind, when you are renting a property, many things remain out of your control. In addition to natural disasters, you have no idea what your renters may do while renting your property. One of the ways you can protect yourself is with landlord insurance.
Before you decide not to get more insurance, you must really consider the positives and negatives of obtaining this insurance. You should know the price of this type of insurance when you decide because that may help you. If the insurance costs you $20 per month, it may be an easier decision. However, if the insurance costs you several hundreds per month, it may not be as easy. Do not make a quick decision about not getting this insurance.