Property Insurance for Rental Property?

Question

Hi all,

Shopping around for property insurance for a rental property... looking for recommendations on policy limits and features to look for!

Here are some basics on the property: Single Family Home, one story, 3BR/1.75BA, attached 2 car-garage, ~1100 sq ft., built in 1980, no pool.

Would love to answers to the questions below (in addition to whatever else you guys may have tucked away in your brains!):

• What type is recommended? (I've heard HO-3 being common?)
• Is replacement-cost insurance recommended on a rental?
• Lots of quotes I have gotten don't cover personal property at all, since it's a rental, I'm thinking that's fine?
• Loss of use - what recommendations here on policy limits (based on rents at about $2200/month)?
• Medical is only $1000/person on all my quotes. Is this good enough?
• Liability is about $300k on most of my quotes. Is this good enough?
• What companies are known to be extremely painful to deal with when making a claim?
• What are some small things to look for in the fine print that could be a deal breaker?
• Recommended deductible: $1,000 or $2500 ?

That's all I have for now. Thanks in advance!!!

Eric Belgau · Answer

Type recommended:  When talking to insurance agents, call it a landlord policy.  Insurance companies have been adding services to Dwelling Policies, and some call them by different trade names, so it's best to forget the jargon and use plain language.  You want a special form (open perils) landlord policy.

If this is your first rental I would strongly suggest a replacement cost policy.  You can save some money by changing the valuation, but you'll retain risk.  After you've managed the property for a couple of years and know how it performs as an asset, you can take a closer look at nuances to see if you can squeeze more cash flow out.

Landlord policies don't cover personal property because you don't have an insurable interest in your tenants' property.

Most policies automatically cover lost rents for 12 months.  The limit for lost rents is time, not money.

Medical at $1000 is fine for a landlord policy, but you should require your tenants to get renters insurance.

$300k is not good enough in my opinion.  $1M liability on your property and a $1M umbrella.  If you're getting a quote from a company that won't go to $1M on the liability portion, make sure they can provide an umbrella with that underlying limit.

Worst companies...  Honestly, all of the big ones behave in pretty much the same way, since they all embraced some iteration of the "deny, defend, delay" tactic.  I generally like smaller, regional insurers for this reason.  I also think the agent you work with is important.  Just ask "what recourse do I have if a claim is denied" and work with someone who doesn't squirm.

The exclusions on landlord policies tend to be pretty straightforward.  In a rental I would make sure you're covered for water damage every way you can be, which sometimes requires an endorsement.  I would definitely check on the lost rents. If you're planning to do repairs yourself I would make sure that doesn't impact the coverage, especially if you're likely to touch wires and pipes.  If you're into fine print, ask for the exclusions on the policies you're quoted along with the quotes.  I'm always a LITTLE more on my toes when someone does that. :)

Put the deductible at the maximum amount you can come out of pocket.  You don't want to file small claims, especially if you plan to grow your portfolio, because you'll pay for it in the long run.  In the event of a larger claim, you'll be out the deductible, but you'll save money the rest of the time.

Brandon S. · Answer

@Eric Belgau - apologies for the late reply! Been totally busy.

But just wanted to thank you for your detailed answer! Super helpful details in there. Thank you very much!!!