Custom Search





Home
Site Map: START HERE
Rental Property Intro
Investment Strategy
Property Values 101
Find a Property
Financing Property
Cash Flow Analysis
Landlord 101
FREE Landlord Forms
Landlord Insurance
Tenant/Property Law
Rental Property Tax
Foreclosure Property
Commercial Property
Retirement Savings
Sell Property
Property Definitions
Rental Property Blog
Property News
Real Estate Videos
About

Follow Me!
Bookmark and Share

"Rental Property Insurance / Landlord Insurance: Your First Line of Defense"


Show Your Love



Rental property insurance, or landlord insurance, is your key "risk management" tactic, but it is not foolproof. You cannot completely eliminate risk from this or any other investment strategy. Your single goal is to manage – and minimize – your exposure to risk and hence potential lawsuits.

And if you're looking for low cost landlord insurance, forget it! This is one area where you get what you pay for. Of course you can and should price shop, but your primary goal is to get the coverage you need to fully protect yourself, not to save pennies.


INSURANCE: PART OF A BROADER RISK MANAGEMENT STRATEGY


Let me say this right out of the gate. While adequate rental property insurance is your first line of defense, it should represent only one pillar of your overarching risk management strategy. Other ways to manage your risk include:

  • Manage your income property activity as a real estate LLC.
  • Eliminate hazardous conditions on the property as soon as you become aware of them (loose steps, loose hand rails, perpetually icy walkways, etc.).
  • Hire out any repairs that could result in injury if not done properly (repairing steps on a fire escape, electrical work, structural repair, etc.).
  • Do not let tenants make any substantial repairs for you.
  • Make sure contractors are licensed, bonded and insured (liability & workman's comp.).
  • Remember that the importance of a tenant credit check cannot be underestimated. This allows you to properly assess the risk of any tenant, in order to properly maximize profit potential.
  • Do not give tenants your home address – get a P.O. box.

But again, your first line of defense is to have good landlord insurance protection to cover yourself against extensive property damage and lawsuits.


COMMERCIAL VS. RESIDENTIAL POLICIES


As a landlord of 2-4 unit multi family houses, your investment property insurance coverage can be either a standard homeowner's policy, or a commercial policy, depending on the specific situation.

For example, I have a triplex that has 2 oversized garages on the lot that I also rent out. Because I need my liability protection to extend to the detached structures, I had to go with a commercial policy.

But most of the time you should be able to simply get a standard homeowner's policy. This is preferable because it's generally cheaper than commercial policies.

That said, both are more expensive than the policy you have on your personal residence because non-owner-occupied rental properties are considered riskier to insure. Just for perspective, a standard homeowner's policy on a rental property will cost roughly 15% more than the same coverage on your own home, and a commercial policy will cost roughly 20-25% more than standard non-commercial rental property coverage.


NAME OF INSURED: YOU OR YOUR LLC?


Contrary to popular belief, most insurers will have no problem naming your LLC as the insured even on a standard, non-commercial homeowner's policy.

If you are holding title in your own name, then your investment property insurance policy must specifically name you as the insured. But if you are holding title under your LLC, then the rental property insurance policy must be written in the name of your LLC.

If your policy names you as the insured yet the property's title is held in the name of your LLC, you could run into a problem if you have to file a claim. It can be a sticky situation, so try not to tempt fate on this one.



KEY TYPES OF PROPERTY INSURANCE / LANDLORD INSURANCE


Ok, so what specific types of rental property insurance coverage do you need? Well, you should probably consult with an insurance agent in your state to finalize your decision, but I can give you my general recommendations.

The quick answer is you'll need property and liability coverage for each property, with a blanket umbrella policy on top. Click on each link for more detail.

And remember, "low cost landlord insurance" is for suckers, so make sure you get the best coverage you can afford for each of your rental properties.



Return from Rental Property Insurance to Homepage



9 Responses to Rental Property Insurance / Landlord Insurance: Your First Line of Defense

  1. Gupta says:

    Landlord insurance is probably one of the most critical aspects of managing rental properties. This page’s info is spot-on. that is; your insurance is truly your first line of defense so make sure you have the proper coverage!!!!

  2. Jennie says:

    This is a great primer on landlord insurance. I will add that it makes sense to go with a reputable insurance company. The last thing you need is for your landlord insuance provider to go belly-up when you need them. I use State Farm. Although the are a little pricier than others issuers, at least I know that they will be there when I need them. For that, my friends, I am willing to pay a premium. Thank you for listening!

  3. Refinance Investment Property says:

    Nice post! Thanks for interesting and sympathetic blog. Fantastic!!! Bookmarked this web page that has this striking guidance. Will arrive back to see if there are any updates. You, the author, are a master. Many thanks.

  4. Fez says:

    Hey man – nice work! You made the incredibly boring subject of landlord insurance somewhat interesting. Kudos to you!

  5. Brent says:

    I am conducting research on REO to rentals. What is the typical rate for landlord insurance as a % of home value?

  6. Ace says:

    Thanks for the advice on landlord insurance and such. I am wondering if it matters what state you are incorporated in for the rate? In other words, is it cheaper to get landlord insurance if my LLC is based in DE compared to, say, PA?

  7. Kandi says:

    Anyone else notice that he winked at the end ?!?!?

  8. anne says:

    8 sibling as tenants in common own mothers house and some want to rent to cover taxes and insurance renter pays utilites no money to be made. some want to sell. concern is insurance to cover all 8 of us from getting sued as landlords, house built in 1940 most likely has lead paint. renters have no children but 6 small grandkids to visit regularly. insurance agent said all policies will exclude lead is this true?

  9. heidi says:

    Are there any companies in South Florida, that offer home-owners insurance for a rental property that is titled in an LLC.
    The property is a beachfront condo?

Leave a Reply

Your email address will not be published. Required fields are marked *

Name *
Email *
Website
Comment

footer for rental property investing page