I am about to start shopping for home owner's insurance for my rental property. What type of things should I consider having a part of my policy? And what would you recommend about the amount of coverage I have? The house is probably worth about $260,000 if I were to put it on the market, so should I just insure it for that price? Looking for any type of tips/feedback. Thanks!
There are two types of insurance: market value or replacement cost. Market value insures the home at the price you paid for it where replacement cost is the price it would take to replace the entire home with the exact same structure in the same location. These numbers can be significantly different. You could buy a house for $200,000 but maybe it would cost $300,000 to build it new again.
Consider a few common scenarios and ask the insurer what it would pay: kitchen fire and you have to renovate, roof damaged by hail storm and requires replacement, or house burns down and you have to rebuild.
If you have a mortgage your bank may require replacement value to rebuild. If you own it free and clear it makes more sense to possibly insure it for what you paid since it's a rental rather than your home. You might consider insuring for lost rent if something makes it unlivable for awhile. Again kinda depends on if you have a mortgage payment to make if it's vacant while repairs are getting done. I would definitely require the tenants to get renters insurance otherwise you and your insurance company will have to sue them if they say accidentally burn up the kitchen. Depending on your personal assets you might want an umbrella or stick it into a land trust/LLC type structure for asset protection. Umbrella won't protect you from a fraud or mold but an LLC would limit that...