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Owning an investment or rental property includes extensive liability beyond collecting rent and maintaining a dwelling. A responsible landlord should have homeowners insurance for legal and personal liability protection, as well as loss of rental income and dwelling coverage. If you have an investment property loan on the home your lender will generally require that you maintain insurance so that their investment is protected as well. There are many different scenarios that you’ll want to be sure that you’re covered for.
Protection from Disaster
Hurricanes, flood, lightning, falling objects, fire, explosion, vehicle damage and water damage… The amount of mayhem that’s out there is extreme. You want to be sure that you’re covered for as many situations as possible. Be sure to purchase enough coverage for your structure, but also any tools, appliances, or furniture that your tenants may be using at the rental property. Consider making an inventory of any assets that you may have to help assist with the claims process in the event of a disaster.
Legal & Liability Protection
Owning and maintaining a rental property can put your at risk for a lawsuit. A Comprehensive General Liability (CGL) policy provides you with the peace of mind you need to protect against injuries or losses (including medical bills, lost wages and pain and suffering) that may result from property defects or neglect. Some insurance companies even provide legal counsel to defend you if you are sued due to a covered loss.
Loss of Rental Income
In the event that disaster strikes and your property is no longer inhabitable, you may not have the luxury to afford the added expense of a vacant investment property while you make the necessary repairs. Fair Rental Income coverage can provide compensation for any rental income you would have received for up to 12 months.
To help avoid liability lawsuits, it’s important that you to educate your tenants on the importance of renter’s insurance. Many renters are mistaken when they think that their landlord’s homeowners insurance policy also covers their belongings. When your tenant signs a lease, be sure to include some information about renters insurance and why it is important for them to obtain coverage for their possessions. If they are educated ahead of time and have a comprehensive policy, they will be less likely to come after you or your insurance company for damages.