Real Estate Agent · Bolingbrook, IL · Member since 2018 · 45 posts · 32 votes
I'm in the process of closing on two duplex's on one lot. I'll be owner-occupying one unit for the first year of the mortgage, and plan to move out and rent all 4 units thereafter.
I'm required to have insurance on the property in order to secure financing, and wanted to see if any BP members could provide some experience-based input on whether to seek out the additional protection provided by a Landlord Insurance Policy (slightly more expensive) or a Homeowners Insurance Policy. Thank you in advance, for your feedback!
Landlord insurance should be cheaper and is required if you want to be covered on property you are renting out. Landlord policies don’t cover any personal belongings inside the building (hence the reason they are cheaper and you should require tenants to get renters insurance.) they are meant as liability shields and sometimes lost rent will be covered. Ps. You also have to mention to most insurance companies any time a unit is empty more than 30 days.
Wrong policy is like no policy. Have a loss and they’ll say wow, you shoulda had landlord policy the homeowners policy doesn’t cover this.
Landlord insurance should be cheaper and is required if you want to be covered on property you are renting out. Landlord policies don’t cover any personal belongings inside the building (hence the reason they are cheaper and you should require tenants to get renters insurance.) they are meant as liability shields and sometimes lost rent will be covered. Ps. You also have to mention to most insurance companies any time a unit is empty more than 30 days.
Wrong policy is like no policy. Have a loss and they’ll say wow, you shoulda had landlord policy the homeowners policy doesn’t cover this.
@Bill B. Thanks for the feedback, much appreciated. Yes, I spoke with a Liberty Mutual representative and he suggested pursuing a landlord policy (will most likely build in some vacancy protection), not covering personal belongings, and require tenants to get renters insurance.
This is my first time purchasing an insurance policy myself, anyone able to provide a 'best practice' number on reasonable deductible and liability coverage amounts?
I assume anything less than 100k/100k is wasted money. I run 300/300k as it’s required for my umbrella policy, the premium change is tiny. Ps. I also run $2500 to $5,000 deductibles as you don’t want to make any claims befow $10-$20k anyway.
Building insurance is not meant for $2,500 or $5,000 claims. Especially as you gather more and more properties. A clean claims history saves money. I’ve made 2 x $30,000 claims in 15 years on 12 properties. (Both were toilet supply line leaks of the knights armor/snakeskin looking type steel lines rather the modern braided type.) neither caused my premiums to increase.
Liberty Mutual is a great place to start. Get the landlord policy and make renters insurance optional - your tenants costs. If they have pets, I'd make it mandatory
I allow dogs and it's good to have to cover yourself
@Bill B. Great advice on the thought process behind a higher deductible plan. Less claims, lower premiums as long as you budget responsibly to cover unseen expenses. Insurance agent is advising on liability coverage, I'm seeing coverage recommendations ranging from $250k-$1M.
@Eric Carr Thanks, makes great sense to give the tenant the OPTION to cover their personal belongings with renters insurance, rather than a requirement which may turn some prospective tenants off. From personal experience in college of living with a roommate and his dog, I'm fully aware of the inevitable damage that pets can cause, so I will heed the advice and make renters insurance mandatory with a pet, as well as a pet deposit.
Before you get a million liability on just the rental, ask how much more the premium is from $250k to a million. Then ask how much a million $ umbrella runs. You might be more likely to get In a bad car accident and be sued for your rental property than the million $ lawsuit for something that happens at your rental. But with the umbrella you cover both. If you don’t have a million on your home I don’t honk I’d get it on the rental.
Ps. Something that should have been asked a few posts ago. What are you worth? All this talk can be ignored if the only thing you own is $100k or less worth of equity in your home and rental property and have a five figure income. All my points are mostly if not only valid if you’re worth at least a few hundred thousand or make well over $100k year. (If you have $300k worth of insurance and are only worth $100k, they’ll take the insurance money. Unless you do something very negligent.)