Risks are part of investing, even in Real Estate and Salt Lake City rental properties. Protecting yourself from the most common and dangerous risks should be best practice and a no brainer! Unfortunately, many rental property owners don’t quite understand what is really out there or what they need to be fully protected. Here is a short list of insurance items we believe will help protect your dreams!
Landlord Insurance on the dwelling.
This is a standard landlord policy that covers two incredibly important areas. The physical asset of the property, and your liability as a landlord. We recommend having a liability coverage of 1 million dollars. Increasing that coverage does not actually change your premium amount very much, just pennies on the dollar.
The physical asset protected typically includes main buildings, secondary buildings and personal assets like appliances. The main property coverage is typically transferred in a dollar amount per square foot. For example if you are protected for $100 a square foot, and 1,500 square feet of the property gets damaged from fire or water you can expect to receive a check for around $150,000. But be sure to check about flood insurance! That is not standard. It may cost you quite a bit more to rebuild your 1,500 square foot home, so keep that in mind when understanding what your insurance does protect and provide you with. Secondary structures are evaluated when a policy is created, so it is important to update your insurance policy if those get removed, or new ones added. The value of those secondary structures are typically a flat value agreed upon when you create your policy and do not change often.
The liability portion of this policy is just as, if not more important. If there is ever a lawsuit related to something surrounding your rental property – which can happen a lot more frequently than we even realize. Liability coverage can provide a lawyer to take your case to court, and fight for you. Typically, if he loses, his fees are still paid by the coverage, and the remainder of coverage left goes to remediate damages. If he wins, the fees area also paid for by the coverage. We recommend a 1 million dollar in liability minimum.
PUP – or Personal Umbrella Policy
A PUP provides additional liability protection. It is an add on to the above policy, and offers protection in million dollar increments. The typical price for this type of protection is around $500 a year. An investor of just a single family home is usually more than ok with the above type of policy, an investor with multiple properties, or a complex, or multifamily units should absolutely consider this a need. If you do not, you are leaving yourself wide open to very big risk.
You might actually be surprised what your basic dwelling policy does not cover. Sure it covers things like an air plane crashing into your home, or a gas pipe explosion, or a caved in roof from snow…. But did you know that it may not cover things like:
And even possibly mud slides?
If your property is in an area where any of these things may be likely, you should definitely consider adding in disaster insurance!
Some states allow you to mandate that your tenants carry renter’s insurance – which is always a great thing! Some states do not, so you will need to check with your local legislation to understand if this is a clause that can be built into your lease or not. Best practice is to get you named as additionally insured on their policy. That way you can be kept up to date if they let it lapse, and it makes making a claim on your behalf a lot easier! Renter’s policies cover some accidental damages, but this policy is really to protect their belongings. Some renters policies can also coverage damages due to a lawsuit – but that is policy specific.
Tenant Liability Insurance
This is a must have for any investor or property owner! This liability type of policy does not cover the tenants belongings, but it does cover damages done to the property by your tenant. This can also help protect you against lawsuits as well as damages your tenants may cause to neighbors or neighboring properties. This helps cover you for things like if your tenant sets the kitchen on fire – their renters policy covers their belongings, but not the appliances. Your standard policy may cover the walls and structure but often times won’t include fixtures, or other things. This is the policy that links everything together and gives you the most possible coverage for any situation you may incur!
Speak with your agent about what you currently have covered! Often times we don’t deal with insurance policies… until it is way to late. Make sure you schedule a time to talk with your agent. If they are unwilling to do so, find someone who wants to protect you! We have a network of great agents who specialize in investor types of policies, if you need help contact us and we can connect you with the right people!!
There is no excuse for leaving yourself open to liability and risk, and being uncovered.
Interested in Tenant Liability Insurance? Give us a call – 801-571-7400 and we can help get you covered!
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