Just as homeowners insure their most important asset, landlords should insure their rental properties against damage and lost revenue. In many ways landlord insurance and homeowners insurance are much the same. They both insure against the same standard perils of fire, storm and other catastrophes. They both provide liability coverage in the event someone is injured on the property. Replacement cost and actual cost categories are available with either type of insurance. There is extra coverage available with landlord insurance that is very important to consider. Landlords assume risks that the average homeowner doesn't. Some of these risks are to the dwelling and some are to the landlord personally.
A typical landlord insurance policy covers damage to the building caused by the tenant. It covers the damage whether or not it is intentionally caused. Some renters are careless and don't have proper regard for other people's property. Their negligence in not reporting leaking pipes or other problems that require repqirs can result in extensive damage and expensive repair bills. Holes in the walls and general destruction are often what are left in the wake of a wild party. Thankfully, most renters don't fall into this category, but it only takes one bad tenant to cost a landlord significant profits.
Landlords sometimes find themselves the defendants in lawsuits brought by renters. The most common reasons for these suits are unlawful rental eviction, discrimination, physical injury or invasion of privacy. A good landlord insurance policy covers the cost of legal expenses incurred during litigation. It also could pay the damages, if the tenant succeeds in his suit. We live in a litigious society, no matter how fair a landlord is, there is no guarantee that he/she won't be sued.
Having an insurance policy that includes rent loss or rent default insurance prevents another big headache that is peculiar to the landlord/tenant situation. Nothing saps profits as quickly as not having rent coming in to cover expenses. There are several way a landlord may suffer a loss in rental income.
The first is if there is a calamity, like a fire, that renders the building uninhabitable. In this case the landlord insurance covers the repairs and reimburses the landlord for the lost rent, until the unit can be repaired and rented again. The second way is if the tenant abandons the property without giving notice. The third is if the tenant stops paying rent but continues to occupy the dwelling. In this case rental eviction proceedings would be started. This process can take a few months. During this time the landlord would continue losing money. Landlord insurance could cover the rent the landlord is losing until eviction is complete and a new tenant can be found.
Most tenants take proper care of the home they are renting and meet their obligations on time. In some cases, circumstances beyond a tenants control could cause them to default on the rent. A landlord might unintentionally say or do something that is perceived as discrimination, resulting in a lawsuit.
The best landlord insurance policy is one that covers all possible snags in the landlord/tenant relationship. Happy tenants make happy landlords.
Hurst Home Realty recommends that all landlords obtain landlord protection insurance. Please check with your insurance professional about obtaining the proper insurance to protect your investment(s).