I just received a quote from my insurance agent on coverage for my first Multi Family property. What are some BIG things that I need to be sure are included/correct coverage? I trust him, but I do want to do my own due diligence as well. Thanks!
First obviously enough coverage if there is a catastrophic loss like a fire for example. Does it cover replacement of the structure or simply what's owed (assuming there is a mortgage in which case the lender is paid and you are left with a smoldering pile of rubble)? Loss of rent coverage if there is lets say a major leak and one of your units is down for a month or two. Vandalism coverage. What happens if a tenant destroys the place (not wear damage or neglect). Or if it's vacant and someone breaks in.
Just ask for all the available coverage's on the policy and what thee additional premiums would be if elected. Then decide what your budget is. You may not want full coverage if it's too much. Also shop around. It's crazy how much difference there is between companies and what they cover. Some commercial policies may not even offer some of the extras I just mentioned. Ask and be informed.
At a minimum, get general liability and building coverage.
- General Liability – This covers you against claims of Bodily injury and Property damage.
Bodily injury – This is the most common coverage everyone is concerned about and rightfully so.These are the most common types of claims.It can be anything from a tenant triping on a step, falling from a balcony, a guest or passerby slipping/falling on the sidewalk.
Property Damage – Example, your building starts on fire, and causes damage to your neighbor.Your ceiling comes down on tenants property.
- Property coverage – This protects the building from certain causes of loss, like fire, wind, water, etc.
Some secondary coverages you should include
- Loss of Rents/Business Income – This coverage give you the equivalent rent $
Property coverage highlights,
1) Ideally have Replacement Cost, not Actual Cash Value (ACV). Sometimes on older rentals, ACV may be the only option
2) Special Form, if they don't offer that, then Broad Form. If they only offer Basic coverage, be aware water and theft claims are excluded
3) Loss of Rents equal to 12 months of income
This is not a complete list, but are generally the most impactful at the time of a claim.