WHAT YOU SHOULD KNOW ABOUT YOUR LANDLORD PROTECTION POLICY
A Landlord Protection policy can also be known as a Dwelling, Fire policy. But that name could be misconstrued to be simply a policy for fire protection. It’s a whole lot more than that. When you have rental properties, coverage for your rental structure is only one small part of your need. Liability coverage is a vitally important aspect that should be carefully scrutinized.
Let’s start by taking a look at the typical components of a Landlord insurance policy.
It will include coverage for the structure, personal property, personal liability and loss of rent. If you are shopping price, beware! A little understood fact is that most insurance carriers will offer 3 levels of coverage. Basic, Broad and Special. As you might guess by the name, Basic will be your least expensive and Special will be the most costly. But as with most things, you get what you pay for. The Basic policy will cover less perils than a Special policy. Examples of perils are: wind/hail/theft/fire/vandalism etc. So be sure to compare apples to apples when shopping for your insurance because misunderstanding or confusion over these three coverage options can result in large and unexpected gaps in coverage.
Most properties will be insured for replacement value. Your insurance agent is responsible for arriving at a fair market replacement value at the time you purchase your policy. However, building materials, labor costs and general real estate market conditions can change dramatically from year to year, so you might want to purchase the extended dwelling coverage which allows for a 25% increase in replacement cost beyond the original stated replacement value. On rare occasions property will be covered for cash value only, which pays out at the depreciated value based on the age of the property. This type of coverage would not satisfy the full extent of the costs to repair and/or replace in the event of loss or damage.
Unless you are renting out a furnished property, the only personal property you would need to consider coverage for would be items that are not built into the house. For example, a refrigerator, washer & dryer, cooking range/stove and window coverings. All other contents are the responsibility of your tenant to insure, as they would be the tenant’s personal property.
Loss of rent is another item to discuss with your insurance agent. Check to see if the insurance company will pay out the rent your tenant was under contract to pay you, or if the insurer will determine their own “fair market rent” for your geographic location. Depending on your type of rental property, this could represent a significant difference.
Liability can often be underrated by the consumer, and is definitely of high consideration to your insurer. Although in theory your liability coverage is to protect you from damages where the homeowner is found legally liable. In reality, because lawyers will site all connected parties in a suit, your insurance carrier has to take into consideration the costs involved in defending a suit, regardless of your liability status. One area where this concern is paramount is dog bites/attacks. Sadly, insurers pay out claims in the millions each year for dog bites. It doesn’t matter that it’s your tenant’s dog, the landlord is almost always sited as a defendant in these cases, which usually go to a jury trial, and where the injured party is a child, the plaintiff almost always wins a generous award. Because of these statistics, all insurance policies have a “restricted breed” list. These dog breeds are excluded from your policy coverage. Another item of liability concern that may be excluded from your policy are trampolines. Pools also require special considerations to be included in your coverage.
One way to expand your liability limits, giving you greater financial protection is by purchasing an umbrella policy. This option is often adopted by real estate investors who own rental properties, and in some cases is considered a preferable alternative to placing rental property in an LLC.
As an endnote to this brief overview of Landlord Protection Insurance, I’d like to share some information that can easily be overlooked when investors are restructuring their real estate portfolio to a business entity or trust. If your insurance policy does not list the trust or LLC, (within which your investment property is held), as an additional insured, you could find yourself the victim of a technicality when trying to process a claim. Be sure you notify your insurance agent of how the deed to your property is held so they can be sure you are purchasing a valid policy and/or the insured for the policy is correctly documented.
Cameo Pulver, owner and senior agent of Access First Insurance provided the insurance information for this article. Access First Insurance is an independent Insurance Agency appointed with over 15 different Insurance Providers all competing against each other to give their clients the best possible rate. Cameo has been trained and inspired in sales by some of the best in the industry. She travels the Treasure Valley to build strong relationships with bankers, lenders, and property managers so she can offer the greater Treasure Valley the best insurance. Cameo highly recommends an annual overview of your Landlord Protection Policy to make sure you are sufficiently, and correctly covered. It is advisable to work with an Insurance agent in the general vicinity of your rental property as they are more qualified to represent your interests due to their knowledge of the area, potential local perils, and experience in working with the local claims adjusters.
Cameo Pulver (208) 854-3621
Access First LLC
849 E State St, Suite 101 ~ Eagle, ID 83616
(The maintenance updates only apply to those of you who have pre-ordered these preventative maintenance services. If you didn’t opt in for a service you read about in this newsletter, and would like to schedule a service, just email Spencer@rentalsinboise.com to let him know.)
We are continuing to work on the following pre-ordered services:
- HVAC System Service
- Dryer Vent Blow Out
We will be starting our Fall Yard Cleanup in October. This service includes:
- Anti-Weed application
- Tree Trimming & Shrub Pruning
October is sprinkler winterization month!
Advertising Charges Explained
RMA pays to have the advertisements we place on our website syndicated to all the major Internet sites servicing the residential rental industry. These partner websites are highly optimized for search results, making your ads easily viewed by people searching for accommodation in the greater Boise area, whether they are conducting their search from Boise itself, or from out of state, or even abroad.
Our clients are charged $90 for each calendar month that your advertising is live. You are charged in this way, because RMA is charged this way. So if you begin advertising mid month, and your advertising continues for four weeks, you will be paying for two advertising cycles, a total of $180. However, if your advertising does stretch over two calendar months or more, a free grace period of 5 days on either end of the calendar month will be granted. As an example – If your advertising commences on the 25th of September, and runs through the end of October, you will only be charged for one advertising period.
Aside from the syndicated advertising partnerships that we pay for, your property is also marketed by professional on-site signage, as well as through our extensive professional network.If you ever have questions about your statement, please contact Karen@rentalsinboise.com.
Our OctoberTenant Newsletter discussed parking etiquette. The reminder list was quite lengthy this month, as we addressed reminders for seasonal preparedness.
If you’d like to read the tenant newsletters, you will find them on our website under the “For Tenants” tab, second to bottom drop-down menu item.
What Are You Interested In?
This newsletter is intended as a resource and communication platform for you. If there is a topic, relevant to the management of your investment property, that you would like me to write on, please let me know!