Fires. Floods. Destruction. Death.
Now that I have your attention, allow me to steal a line from Ferris Bueller's Day Off "Life moves pretty fast"...
You're living it day by day, planning for your retirement, the kids going to college, and you get that call: your rental property has suffered a fire, a flood, or significant vandalism. Okay, if you have the proper insurance, no worries!
However, if you don't carry the proper insurance, you have some challenges. Picture Duane (The Rock) Johnson is running at you. Fast. In a narrow hallway. At night.
First, what is rental property insurance?
This question may seem silly, particularly if you're a seasoned veteran in the rental property world. Yet the newbies need to know.
Also called Landlord Insurance, this policy has many added aspects compared to a standard homeowner policy. What are the differences? Well, there's...
Vandalism and Malicious Intent
While these coverages appear to be the same, they are pretty different. Malicious intent (also called malicious mischief) requires an intention to cause harm. For example, a miscreant spraying graffiti on the wall of your house is straight-up vandalism, and the same bad actor pouring concrete into your toilets is malicious intent. Malicious intent can also be from a resident leaving the water on and destroying all the wood floors. This type of insurance will protect you against this.
Vandalism coverage comes into play when someone breaks into your home and causes damage. Or if your AC condenser is stolen. However, remember that after 30 days of vacancy, if you have not contacted your insurance and gotten an extension, you may not have this coverage!
Loss of Rent or Loss of Use
Using a recent example, say your rental property catches fire. The resident will need to vacate, of course. During that time, you will have no rent coming in. So now you have the deductible to pay, possible utilities, other upkeep, and repairs happening, coordinated through your insurance company, and all the while, no rent whatsoever. Unless, of course, you have a loss of rents/use coverage.
Now let's look at this another way, say the resident caused the damage that made the home uninhabitable. In this case, your insurance company still gets involved. More on that later.
True Story: We had this terrifying scenario occur recently. A wire in the attic sparked and caught the insulation on fire. Thankfully no one was injured in the fire. However, the home was condemned, and the resident had to vacate the property immediately. The landlord is currently without rent, and the home is under construction. When this is all said and done, the landlord will be without rent for 12 months. Not all is lost, though, as the landlord has loss of rent coverage and will be reimbursed for up to 12 months of rent, and his fire policy will rebuild his house. It's all in the same policy, just different coverages for different claims.
What's The Cost of Landlord Insurance?
Generally speaking, you could expect to pay about the same as you would on a homeowner's insurance if you lived in the property before you rented it out. Here's why. You're protecting the contents on a homeowner policy, and with a landlord policy, you are not. That is the resident's responsibility. Occasionally some carriers will charge a little more, but not much.
We require that all of our, and your, residents carry renter's insurance. The difference between your policy and theirs is that your insurance covers possible losses to the structure, and the renter's insurance covers the resident's belongings.
However, say the resident caused the loss. Say they left a bathroom fan running while away, and the house burns down. Or they left the stove running and left for the day. Simple negligence, in other words. Your insurance will go after their renter's policy regarding the loss.
One of the most dangerous items in a home is the seemingly innocuous bathroom fan. Left on, they can start a fire, and people tend to leave them running while out.
We advise people to shut them off when not using the bathroom.
7% of household fires start at the water heater. 4% of household deaths result from this.
For this reason, we check the water heater when we rehab properties and perform an annual inspection.
Should someone pass away in your home in a fire? That could be up to a $5,000,000 claim against you or your insurance. For this reason, we check CO detectors and smoke detectors with a smoke emitter during annual inspections. We also change all the batteries in these items at property rehabs, and we advise residents to change the batteries every six months.
True Story: Several years ago, a resident fell asleep while smoking in bed. Tragically, the individual didn't survive, and the whole home was a total loss. I had recently completed an annual inspection at the property and checked the smoke detectors, and they were operating. The resident had signed off that the smoke detectors were functioning correctly. Due to that fact alone, the landlord was not held liable for any damages the resident and family endured and the person's death. Had our strict policies not been followed, this could have been life-changing for the owners of this property. Property Management is far more than renting a property. It's ensuring that property is safe to live in and having documentation showing you made it safe.
Have questions regarding the proper insurance (even if you're not a client of Management One) to have on your property, call our office today. 951-735-2000