Good morning and happy Monday BP!
I'm shopping around for insurance on my first potential investment property (small multi fam). What are some must haves or requirements for your policies on your rental properties? Also, please tag any agents in the Cleveland area I can reach out to. Thanks in advance for the help!
At a minimum, rental properties should have three coverages:
- General Liability Coverage
- Building Coverage
- Loss of Rents / Business Income Coverage
General Liability Coverage - covers against lawsuits claiming you are responsible for Bodily Injury and/or Property Damage.
Bodily Injury – i.e. a slip and fall by a tenant or other person on your property.
Property Damage – i.e. a fire at your property damages neighboring properties you
do not own.
Building Coverage – this mitigates and restores the building from covered losses. This is also the coverage that is required by lenders to secure loans.
Building Coverage – i.e. fire, wind, water, vehicle impacts and other elements of structural damage.
Loss of Rents/ Business Income Coverage– pays for loss of rental income when a building that is rented to others is damaged by a covered loss.
Other items to consider:
1) Ideally have Replacement Cost, not Actual Cash Value (ACV). However, ACV may be the only option on older properties.
2) Special Form, if they do not offer that, then Broad Form. If they only offer Basic Coverage, be aware water and theft claims are excluded.
This is not a complete list, but are the most impactful coverages following a claim. Consult a qualified agent well versed in rental property insurance to review your specific insurance needs.
@Jason Bott hit on the main items you should focus on.
Replacement Cost coverage is always the best type of coverage but for many of my NE Ohio investor / insurance clients it’s not necessarily an option.
Ex: buying an older 1800 sqft home for $40k and insuring it for over $200 doesn’t make sense for the investor’s budget nor the insurance company underwriters.
Don’t get me wrong - I have many older landlord homes insured for full replacement cost but I also have just as many others at Actual Cash Value.
A lot of time I’ll start the policy at market value then add to your coverage for improvements such as kitchen, roof, bathrooms, etc with the goal of protecting your principle investment.
I always suggest high liability limits and adding on Sewer & Drain backup coverage if there is a basement.
If you have any other questions I’d be happy to help.
Thank you guys! Appreciate you taking the time to provide some insight.
Can you guys suggest good insurance companies/agents in the Cleveland market that cater to investors?