Rental Property Investor · San Clemente, CA · Member since 2019 · 160 posts · 34 votes
Do you carry a Homeowner's Policy, a Landlord Policy, Fire Insurance, or another type of insurance for your rentals? I've heard so many different options I'm not really sure what to ask to be quoted.
Also- do you get a different/ separate policy while the property is vacant and being renovated?
You will need a homeowners policy for your primary residence
For your rental properties, you'll need a landlord policy. These policies are also known as Fire Dwelling and Dwelling Fire
For liability I always recommend to my clients a minimum of 500k then adding at least a $1M umbrella on top of all policies
If the building is vacant or being renovated (depending on the extent of the renovations), yes you would need a different policy. If it is simply vacant or is having minor renovations, you could get a vacant dwelling policy. If there are major renovations or the time frame of the renovations is more than 2 months, you would need a builders risk policy.
Is your current insurance broker guiding you through these different policies or are you having to do all the research on your own?
You want a policy that covers non owner occupied. Different companies call them different things. Be upfront. I have a rental property I need to get insured. Make sure you add loss of rents in case of an emergency. I had a fire in one of my buildings and they are covering my rental income for up to 12 months while we repair the unit. Well over 100K.
Instead of upping the liability on each property, an umbrella policy can do the same thing on all properties and is scalable as you grow. $1million starting out, 2,3,4 million as you acquire properties.
You will need a homeowners policy for your primary residence
For your rental properties, you'll need a landlord policy. These policies are also known as Fire Dwelling and Dwelling Fire
For liability I always recommend to my clients a minimum of 500k then adding at least a $1M umbrella on top of all policies
If the building is vacant or being renovated (depending on the extent of the renovations), yes you would need a different policy. If it is simply vacant or is having minor renovations, you could get a vacant dwelling policy. If there are major renovations or the time frame of the renovations is more than 2 months, you would need a builders risk policy.
Is your current insurance broker guiding you through these different policies or are you having to do all the research on your own?
Thuy Pham-Satrappe
Having an umbrella policy these days is really a no-brainer. Not having one is similar to making a decision to not have health insurance for yourself and immediate family.
Especially if you own rental property, an umbrella policy is a must.
You might look into insuring your primary residence and rental property with the same insurance company to achieve discounted insurance costs as you build your portfolio.
Everyone has had some good responses! Insurance is definitely a must these days especially with all of the natural disasters constantly going on! Also, requiring renters insurance is also a good thing to do to make sure you and your rental is safe - they can get plans that are as low as $15/month.
I concur with all the posters that indicate to have an umbrella coverage on top of the coverage on each rental property. It is easy asset protection and does not cost that much for the peace of mind. It also does not cost much to raise the coverage.
But I did not see any post about requiring tenants to carry rental insurance. It provides the protection but it also reduces the claims against your insurance. For example we recently had a 1 Bathroom unit have a shower pan failure. Tenants had no place to bathe or shower. Their temporary relocation costs were not our problem.
To summarize, you need to insure each RE, you should have an umbrella policy, and you should require your tenants to have renters insurance.
@Thuy Pham-Satrappe Hi Thuy, I work for an asset protection organization and we deal with these types of questions a lot. Insurance is great, but it's only one part of the picture. All the forms of insurance you mentioned are useful for rentals, but insurance can only protect you from events at or relating to the property. For example, you could still lose those properties if you got in an accident and didn't have enough cash to pay a settlement. Cheap LLC's(they vary widely in costs) cover those type of areas and provide a safety net for the extreme situations where insurance coverage doesn't work. Of course, there's a a lot more on how to protect your rentals than just Insurance and LLC's too. If you're interesting in knowing more, just DM me or connect.
@Matt Moylan I have a broker but I don't feel she is well versed in rental/ investment policies so I want to see what everyone else is doing to get a better understanding
I concur with all the posters that indicate to have an umbrella coverage on top of the coverage on each rental property. It is easy asset protection and does not cost that much for the peace of mind. It also does not cost much to raise the coverage.
But I did not see any post about requiring tenants to carry rental insurance. It provides the protection but it also reduces the claims against your insurance. For example we recently had a 1 Bathroom unit have a shower pan failure. Tenants had no place to bathe or shower. Their temporary relocation costs were not our problem.
To summarize, you need to insure each RE, you should have an umbrella policy, and you should require your tenants to have renters insurance.
Good luck
Unfortunately, not all states allow a landlord to compell a renter to carry renter's insurance. It can be encouraged, but not compelled.
Umbrella is relatively inexpensive, but I'm not necessarily chasing price for my insurance. The main factor is better reputation for paying out when a claim is made. Are you really insured if you have to fight cheap insurance companies for your compensation?