While there are a plethora of different landlord insurance policies available, most typically fall into three major categories: building insurance, house insurance, and contents insurance. Although there are companies that sell package policies which contain a combination of all three, the offerings may vary from provider to provider.
Ultimately, the best method to take when shopping for building insurance is to take into account what your specific needs are, the number of properties you wish to ensure, and what type of discounts are being provided for your particular situation. This will result in saving far more time and money than had you simply purchased the first or most recognizable product.
The Necessity of Landlord or Building Insurance
There is no legal requirement to purchase landlord insurance. However, it is highly recommended, as the cost of the insurance premiums are trivial when considering the possibility that your entire property could be lost as the result of a single incident. These buildings are valuable investments worth hundreds of thousands of dollars. At the same time, given our litigious society and the propensity for accidents in the home, there is no shortage of scenarios where you could be liable for an injury or accident involving a tenant. Having the proper business insurance policy can safeguard you from such an occurrence.
Even if you have an existing home-owner or building insurance policy, you may want to check the fine print to ensure that you are covered for the most common liability claims. Having an insurance plan will do little good if it is filled with exclusions and technicalities regarding what types of claims you are protected from.
Being a landlord, your most valuable asset is the property itself and the rent money you acquire on a monthly basis. All of this can be lost if you fail to protect yourself from a liability claim. Typical building insurance coverage will protect you against damages caused by fire, explosion, earthquake, flood, lightning, riots, falling trees, theft, and other damages.
Landlord insurance is generally utilized to cover smaller aspects of a property, such as the carpets and countertops that may be damaged in the event of fire or flood. This can be added on top of your existing building insurance premium for a nominal fee.
The price of building insurance will hinge on a variety of disparate factors such as the location of the property, the value to restore the building and the type of tenant living in the residence. For example, if a property were easy to rebuild, the amount of the premium would be significantly less than a more expensive structure. Location is another prime factor, as certain areas are more prone to fire, theft, or natural disaster. The type of tenant usually only comes in to play if the person has a criminal history, or if the amount of tenants living in a confined space could potentially make it more hazardous.
Most assessments will include an estimate of the value of reinstatement. This includes not only rebuilding the property anew, but any clean-up costs associated with demolishing and disposing of the wrecked property. Some people, however, make the mistake of using the sale price to assess the reinstatement value, which can significantly overestimate the cost of a rebuild. This is because the majority of a property’s value is tied into the land and not the structure that lies atop it. Rebuilding should in fact cost substantially less than selling the property itself.