Insurance can be invaluable, especially when we’re talking about an investment as large as a property. When you have an asset that’s worth hundreds of thousands of dollars, you obviously want to protect it. Insurance works differently with a rental property than it does with your own home.
If you’re renting out a property that was once your primary residence, you need to switch your insurance policy to a landlord insurance policy. If you don’t, claims may be denied. Talk to your insurance agent about how to best ensure you have the coverage you need. If you don’t have a great agent already, talk to us. We can make a referral and help you understand what you need to be properly covered.
Here are some good starting points.
Landlord Insurance vs. Homeowner’s Insurance
The main difference between your landlord insurance policy and the homeowner’s insurance policy you have on the home you live in is that your landlord policy covers the structure of the home and the costs to repair and replace it. However, it doesn’t cover any personal belongings that aren’t yours. When you live in a home, your insurance covers the structure and all your belongings. But, with a landlord policy your home is covered, but not the tenant’s personal items.
This is an important distinction. If there’s a covered loss, you’ll need your landlord policy to pay for any repairs and replacements to the property itself. They will also cover your own property, such as appliances within that house that may be damaged. However, the tenants need their own coverage.
Require Renter’s Insurance for Lakewood Tenants
This distinction is what drives our recommendation that rental property owners require renter’s insurance of your tenants. For a minimal cost, your tenants can get a lot of coverage which will protect them in case of loss. If a fire sweeps through the property, your insurance policy will cover the loss. But, your tenant’s electronics, clothing, and furniture will not be covered. Make sure they understand that and insure themselves.
Liability Insurance and Your Policy
A good landlord insurance policy will also have higher liability coverage than your average homeowner’s policy.
This liability coverage is important.
With tenants living in your property, anything can happen that might result in a lawsuit. If you are held accountable for injuries that occur to your tenants or your tenant’s guests, you’re going to want enough liability insurance to protect you and your investment. Talk to your insurance agent about the required or recommended liability limits. If something happens and you’re sued, you want to be protected.
Lakewood Rental Homes Need Loss of Rent Coverage
It’s important to cover yourself in case you have to move your tenant out of the property. Suppose there’s a blizzard that causes the roof of your home to collapse or the heat dies during a particularly frozen winter, and there’s a delay in getting the new furnace installed. Your tenants will not be able to stay in the home, which means you may have to put them in a hotel. If they can’t live in the property for an extended time, you’ll lose a lot of rental income in addition to paying out of pocket for costs like hotel bills. If your landlord policy doesn’t already include loss of rent coverage, consider adding it.
Insurance may cost more for a rental property than a home you occupy, but the good news is that those insurance premiums are tax deductible.
If you have questions about how insurance can protect your rental investment, please let us know. You can contact us at Assured Management, Lakewood property management experts serving residential landlords in West Denver and the surrounding areas, including Littleton, Golden, Wheat Ridge, Arvada, and more.