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Many first-time landlords mistakenly think that their homeowners’ insurance policy will cover the costs associated with a rental property in the event of an accident, natural disaster, or another damaging event. Your homeowners’ insurance typically covers owner-occupied homes, meaning once you start renting out to tenants, your coverage no longer applies. This leaves you, the landlord, liable for appliance malfunctions, personal injuries suffered by tenants on the property, and property destruction resulting from a natural disaster or burglary.
Landlord insurance solves this liability issue by providing coverage for the same damages under a homeowner’s insurance policy while the property is being rented. Any homeowner wishing to take on tenants needs to carry landlord insurance.
Income protection For Property Owners
A comprehensive landlord insurance policy features three core protections:
- Property Damage: If your rental property suffers damage from a natural disaster, fire, electrical or gas malfunction, vandalism, or tenant negligence, property damage coverage helps pay for the cost of repairs.
- Lost Rental Income/Rental Default: If your rental property becomes uninhabitable, Lost Rental Income provides temporary rental reimbursement to cover the rent you should be receiving from tenants.
- Liability Protection: If a tenant or visitor suffers an injury on your property due to a maintenance issue, Liability Protection covers potential medical and/or legal costs.
Each type of insurance coverage is subject to your landlord policy’s deductible and limits, though they typically have a separate deductible and limit.
A workers’ compensation agreement doesn’t protect self-employed small business owners and contractors if sickness or disability renders them unable to work. Income protection insurance provides you with peace of mind when you cannot work due to injury, accident, or illness. It works by paying a weekly or monthly benefit up to 75 percent of your gross wages for a set time frame. iSelect.com.au breaks down all that you need to know about income protection, how it will benefit you, and how to find the best policy for your circumstances.
Income protection insurance can be thought of as a type of disability insurance that gives you financial security when incapacitated by a short-term disability that prevents you from working. This disability coverage paycheck will come into effect so long as you are incapacitated for longer than your policy’s waiting period. In some cases, income protection will cover an involuntary redundancy.
Additional Coverage Options
Like any insurance policy, landlord insurance policies offer several additional coverage options and insurance products that could be useful in the long run. Guaranteed Income Insurance covers you if a tenant is short on rent for one month or fails to pay at all. Flood Insurance is a smart idea if your property is located in a flood-prone area. Emergency Coverage helps cover some or all of the costs associated with traveling to the property to resolve an emergency issue, such as the tenant being locked out or a leaking dishwasher.
A smart way to eliminate issues with tenants accidentally locking themselves out is to manage access using your smartphone. A smart video intercom system from ButterflyMX integrates other cloud-based systems and a property management dashboard into a smartphone app that makes property access seamless. The smart video intercom from butterflymx.com allows property managers to enhance tenants’ safety and convenience, review property entry logs, issue or restrict access, and integrate with other cloud-based systems. Tenants can receive video calls, remotely unlock the door, and grant managed access to delivery people and service providers.
What Isn’t Covered?
Landlord insurance helps cover the surprise expenses resulting from sudden and accidental losses, but you’d be surprised at some of the exclusions from your policy’s coverage. You’ll likely pay out of pocket for maintenance and equipment breakdowns, such as a broken dishwasher or other home appliances. Equipping your property with energy-efficient appliances that meet the U.S. Department of Energy (DoE) or the Environmental Protection Agency (EPA) criteria is a smart way to save on monthly expenses and keep money on the side for emergency maintenance.
Energy Star products are efficient appliances that use less water and less energy, which not only reduces energy use but lowers your monthly energy bill. Solar Cells explains the certification for energy-efficient appliances and how lowering energy consumption improves your energy bill and carbon footprint. The most common energy-efficient products include refrigerators and freezers, clothes dryers and clothes washers, and dishwashers.
Look into your homeowners‘ insurance policy before renting out to determine what’s covered and what’s not so that you can find the right landlord insurance policy to give you peace of mind.