Rental Property Insurance
This Is A Member-Only Page
Members' Homepage Rental property owners and managers have a responsibility to preserve their property, be a good neighbor, and to help protect tenants, their guests, and the public from economic loss or harm. Insuring property is not only important to protect assets but is likely required by lenders as well.
Accordingly, we must evaluate our risks on a regular basis to help determine our potential property damage risks and the liability for injury or financial loss to others, then try to carry the appropriate insurance to deal with them. However, that may not always be easy or economically feasible.
Insurance companies continually evaluate their losses and exposure. Then they target the areas of the casualty business where they think they need to increase, or decrease business, to better balance their risk. As a result, the insurance business is in a constant state of change. We can enjoy huge annual savings by shopping for the company that wants our type of business at the moment. Lately, however, we have also found some well known companies who just don't want mom and pop rental properties at almost any price right now.
As you may know, 60% of rental housing in America is owned by small (mom & Pop) landlords who own less than five units. As a result, many insurance companies allowed their customers to purchase property damage policies on each property and extend the liability protection from their homeowners policy to up to five rental properties.
That is changing. The companies have suffered too many losses from sometimes serious but often silly lawsuits alleging everything from slip-and-fall, to charges that a tenant wasn't warned about a troublesome neighbor.
There is also a higher than average loss ratio from buildings more than fifty years old; the kind of property located in older urban neighborhoods that are the most likely to be converted to rentals. If you currently own that kind of property, make sure you pay your premiums on time so you don't risk cancellation. It may prove very difficult to reinstate your policy or find another company willing to take it without complete inspections, both inside and out.
The Insurance Services Organization (ISO) developed standardized language for business and property policies that have been used by most insurance companies in most states since the mid 1970s. As a result, property owners and managers are able to shop for insurance knowing that the kind of coverage they buy will likely be the same with each company. That allows price and coverage comparisons without having to read every word of every policy.
The best option for most landlords is business insurance, covering all their properties - if you can get it. Business insurance usually includes Commercial General Liability Insurance (CGL) that can be customized to cover practically every risk. Residential insurance policies are pretty well standardized as well, using the ISO Broad Form. We have included much of the typical language for each type of rental property insurance policy in this RHOL member's insurance web. Once you have a good grasp of: coverage, perils insured against, exclusions and conditions of the CGL, the ISO Broad Form and Personal Liability insurance, you should be ready to shop for your insurance on a regular basis.
Protecting Tenants from the Manager or Maintenance Employees Rental property owners should be particularly careful hiring property managers and maintenance personal since they interact with all the tenants and have access to master keys. Landlords should scrupulously check any employee's background to the fullest extent allowed by law, and closely supervise job performance. A tenant who gets hurt or has property stolen or damaged by an employee could sue the property owner for failing to use due diligence in employee screening or supervision. If tenants complain about illegal acts by anyone, landlords must pay attention and investigate. Property owners should always make sure the insurance they buy covers any illegal acts of their employees. A last note before you explore our additional insurance pages: When you select a company or agent, always consider their reputation for claims service along with their price.
Warning: The zoning may have changed on your property location since construction or renovation. In the event of a substantial loss, you may not be able to rebuild the same type of property or number of rental units. Check with your municipality and your insurance agent. Then make sure that you insure for that eventuality.
Members' Homepage
|