You need landlord insurance webinar by TurboTenant and Steadily. So my name is Krista Ruther. I am the senior content marketing writer here at TurboTenant. I am joined today by the incomparable Adam Swearingen. Adam is the senior vice president of growth and partnerships at Steadily. So an important guy, we’re very lucky to have him in the mix.
Thanks for, thanks for having me Krista. And it’s an honor. We’re, we love TurboTenant. He’s a great partner of ours, but we’re really, really excited to share with you guys everything we’re doing at Steadily, but more importantly to help educate on landlord insurance. So again, thanks for having me excited to be here. Wonderful.
Just a couple of moments before we start, we are going to go ahead and record this webinar for you and send it out after the session ends. Keep your eyes peeled for an email with that information. Also, feel free to ask questions in the chat or through the Q&A section. We will answer all of those questions at the end of our presentation, so do be sure you stick around.
All right, moving on. First off, let’s address what’s most important: What is landlord insurance? Landlord insurance, also known as rental property insurance, is designed to protect you as a landlord when you are renting out your property to others. It differs from homeowners insurance, a point we’ll clarify by the end of today’s session. Homeowners insurance is applicable when you live in the property, while landlord insurance applies when you don’t. Combining landlord insurance and renters insurance provides comprehensive coverage. We’ll delve into this as well. With the confusion around necessary insurance types, we’ll discuss landlord insurance, renters insurance, and homeowners insurance. Then, we’ll delve deeper into landlord insurance coverage.
It’s essential to note that landlord insurance is your responsibility as the landlord. Alongside renters insurance paid for by your tenant, you’ll find a solid foundation for peace of mind. So, what’s renters insurance? As you might have guessed, renters insurance is coverage that your tenant pays for. It safeguards their belongings against accidents, natural disasters, and other incidents. In case of destructive events, like a tornado damaging their belongings, they can seek reimbursement. It also covers them against malicious actions and litigation. For instance, if a guest injures themselves on the property and sues the renter, renters insurance helps with costs. Additionally, it includes living expenses in case the dwelling becomes uninhabitable. The tenant pays for renters insurance, benefiting you, the landlord, indirectly. When tenants lack insurance, they might turn to you for assistance in emergencies. However, with renters insurance, they can follow proper channels for reimbursement and reduce their reliance on you.
Moreover, renters insurance minimizes legal issues by covering medical bills and legal fees if someone gets injured on your property. We have a poll about renters insurance for you. Now, let’s discuss the percentage of tenants with renters insurance. It’s intriguing because not all landlords mandate renters insurance, but we strongly recommend considering it if you don’t. We even offer renters insurance through TurboTenant if you’re interested. As the responses come in, give it a bit more time. Fascinatingly, most of you estimate that 10% or fewer tenants have renters insurance. However, the actual figure for this year is 37% of tenants having renters insurance. Quite interesting indeed.
You know, I think what this poll is telling us, Krista, is quite clear. We recognize that more residents, more tenants need to have insurance. Something you pointed out, Krista, is profoundly important and serves as a solid first step – requiring renters insurance in some form. Introducing language in your lease agreement that mandates it is an effective initial move. Let me illustrate with an example. Sharing examples often helps concepts click for everyone, so I’ll walk you through one. Now, this is a spontaneous scenario, but imagine you have a rental home. Suddenly, an electrical shortage sparks a fire. Firefighters arrive, extinguishing the flames with a deluge of water from the hose, leading to waterlogged conditions. Let’s say our renter, Susie, is in this scenario. Her belongings, including furniture, get soaked, clothes reek of soot. Regrettably, Susie lacks renters insurance and holds you, the landlord, accountable for the electrical fire. She demands $30,000 for new furniture and $5,000 for a six-week Airbnb stay during repairs. However, your landlord policy doesn’t cover her personal belongings. In this situation, if Susie had a renters policy, she could file a claim and handle it through her coverage, sparing you involvement.
Now, fast forward. The property is eventually habitable again, and Susie returns, throwing a housewarming party. As fate would have it, a guest ends up with a broken leg, as Krista mentioned, an all-too-common occurrence. In an unfortunate twist, Susie’s guest happens to be a professional dancer with the Kansas City ballet, dealing with a double femur fracture. This dancer then demands $100,000 for medical expenses and lost income, pursuing Susie for liability. Typically, Susie’s renters policy would cover this, handling liability, but without renters insurance, there’s no financial cushion. Guess who the resourceful lawyer of Susie’s guest turns to? Yes, you, the landlord, with deeper pockets than Susie. This scenario unfolds yet again.
Now, one more leap into the future. Following the stress of the legal battle, Susie decides to unwind by lighting an aromatherapy candle in her room. She dashes to Starbucks for a Frappuccino, neglecting to blow out the candle. Upon her return, half the house is engulfed in flames. While Susie’s renters policy should have dealt with the damages’ liability, its absence places the burden on you to utilize your insurance policy. This can raise your deductible and elevate your rates. These examples highlight real situations, and I’m sure many of you have similar stories. It’s crucial to maintain varying levels of coverage to safeguard all parties involved. It’s vital for Susie, and it’s equally significant for you. Accidents occur, and our preparation is aimed at addressing them adequately. Absolutely.
Great and tragic examples. So, that is why it’s important to have both landlords insurance and renters insurance.
But let’s talk about homeowners insurance. That’s another important piece of the puzzle, although not one that’s going to pertain to much as a landlord. So, I’m going to go on and avoid a standard homeowners insurance policy covers the building and personal property damage, as well as liability, but it only applies if you live in that dwelling so if it’s your primary dwelling, you need homeowners insurance.
If it’s your rental unit, you need landlord insurance. And it’s it’s challenging because they cover similar things they come up you, Oh, someone’s raised their hand. We will circle right back around to Marilyn.
And so, homeowners insurance is going to a standard policy will protect against building and personal property damage and liability. But if you’re renting it out like I said only proper Wow, getting all kinds of scramble I’m too excited about insurance.
So, if you’re renting the dwelling landlord insurance.
Yeah, Krista, I think to jump in here, right, there’s a lot of landlords and investors that have homeowners policies. In a lot of it, we find is because they just don’t know that they were supposed to switch over to a landlord policy. And you know, maybe they didn’t intend to rent the home out, right? It just kind of happened overnight, and they took advantage of an opportunity to turn into a rental.
You know, I think what we find often is that landlords can get by with buying a homeowner’s policy if the insurance company doesn’t know you’re renting it out. But as soon as they start investigating a claim and they find out that it’s being rented out by somebody else, what could happen is they’re going to deny the claim and cancel the policy, and that’s definitely a situation you don’t want to be in. Absolutely. Okay.
So, the purpose of landlord insurance: A landlord insurance policy covers the same things that a general homeowners insurance policy covers, in addition to a couple of other specific things that you would need as a landlord.
With that in mind, can’t stress this enough: landlord pays for landlord insurance, tenant pays for renter insurance, because that protects their belongings and bottom line, too. The knees rise.
Homeowner insurance is paid for by the homeowner, but only if you live in that dwelling. That is the trifecta of insurance regarding properties.
You know, one thing—I’ll jump in and comment again here, right—like, you know, if you’re running out part of your main home, right, like say you live in the home and you’re renting out a part of it to a tenant, you need landlord insurance and your tenant needs renter’s insurance.
There are some homeowners policies that may have a home share exclusion, right? So, that’s important to know. Just because you’re living in the home and you may be renting out a portion, you might not necessarily be covered.
You’ll hear us say this quite often today: Check with your agent before renting out a room to ensure you’re fully covered. Right—the key part being, check with your agent. It’s important to communicate and ask questions because, you know, there might be exceptions and exclusions that you don’t know about, and you don’t want to find out about them when you actually really need them, right? Absolutely.
Yes, when in doubt, check in with your agent. They’re going to have all the details that you need. Now that we’ve told you why landlord insurance is important, let’s talk about the benefits that it offers.
The main benefit of having landlord insurance is that you will have fewer out-of-pocket costs, which means not only is your bottom line bolstered, but you have better—I’m going to talk about peace of mind. Additionally, liability protection protects you from legal or medical fees in the case that a tenant or their guests are injured on your property, as we’ve given great examples of. Tenants can sue for a payout or coverage of medical expenses related to everything from physical injury and death to financial difficulty and emotional harm. So, with liability coverage, any possible expenses related to legal or medical fees will be covered, which protects you from those out-of-pocket costs.
You can also get some rental income protection, which shields you in case something happens to your property that makes it uninhabitable. A fire, mold, tornado damage—all of this would be a huge financial loss, but rental income protection can cover you by giving you back some of that income that you would have otherwise lost out on. So, if your dwelling is uninhabitable, but you have this protection, you will get some of that income back. Usually, the coverage will only extend up to a defined period of time, such as 12 months. So, when you’re purchasing a policy, always make sure you check in with your agent to understand what that coverage includes, and we highly recommend making sure rental income protection is in the mix.
Lastly, here we have certain tenant damage coverage. So, what does that mean? There are two types of damage that can be caused by a tenant: accidental and malicious or intentional damage. Some policies include malicious damage caused by a tenant. So, ask your agent to confirm whether your policy includes that as well. But remember that insurance policies aren’t designed to cover normal wear and tear, so it doesn’t mean you’ll be able to submit a claim to install new carpet every time someone moves out.
Getting even deeper into it, what does landlord insurance cover? So, a good comprehensive policy will include three key protections. It will have property damage protection. One second. Excuse me. Which covers any damage to the property caused by a natural disaster, vandalism, theft, irresponsible tenants, or other things that could damage the physical structure of the property. But not all policies are created equal. Some basic policies only cover the perils that are named, like fire, lightning, smoke, and hail. Other policies are broader and cover everything unless it’s specifically listed as an exclusion to the policy. But virtually every policy these days includes a COVID-related exclusion, for example.
It should also cover loss of rental income/rental income protection. So, should something occur that causes your property to be uninhabitable, as we’ve discussed, this would provide temporary rental income reimbursement that acts as a replacement for the rent you would be receiving if a tenant was able to live in the dwelling. Obviously, not a good situation for anybody, but you do want to make sure that your bottom line is covered. One thing to note here: you can’t charge the insurance company more than what you would have had the tenant pay for rent. So, if your monthly rent cost is $500 a month and that’s what your tenant pays, you cannot go to suddenly ask them to pay you $1,000 a month instead. Not quite how it works. You’re only getting a one-to-one reimbursement there.
Lastly, the third big thing is liability. So, that covers any medical or legal fees such as lawsuits, bodily injury claims, and settlement costs that could ensue if a tenant or visitor is injured on your premises. There are, of course, additional coverage options that you may want to pursue to further protect your investment. For example, flood damage insurance, which would cover any damage caused by a flood. But it’s important to note that flood insurance is almost always excluded from the general policy. That’s something you need to add on, so it’s separate, but it can usually be purchased through your same agent.
Guaranteed income insurance, aka rent guarantee, covers partial or full rent payments if the tenant is unable to pay for one month. Something that many landlords experienced during the height of COVID. This one is always a separate policy and it’s separate from the loss of rental income coverage. Personal property coverage protects your furnishings if you’re renting out a furnished unit. So, this is usually available in every landlord policy. You just have to increase the limit so it’s high enough to cover your specific furniture. If you don’t have a furnished unit, you can still carry a small amount of personal property for appliances and other things you might be keeping at the home.
Okay, but what doesn’t landlord insurance cover? As you see, it covers quite a bit. It protects you a lot, but it will not protect you, or I should say it will not protect your tenant, when it comes to their belongings, which is why requiring renters insurance is such a good idea. Also, as noted earlier, it will not protect against normal wear and tear, which is damage or deterioration resulting from ordinary use. So, you know, having to replace the carpets when someone’s moved out, if it’s not an extraordinary amount of damage, if it’s to be expected if they’re just using the property as it’s intended, it’s not going to be covered under landlord insurance. And lastly, property in which the homeowner lives is not going to be covered under landlord insurance if they’re not renting out any portion of it, because that would fall under homeowners insurance at that point. I told you I would really nail that in for you. Alrighty. And now to do a deeper dive into the different types of landlord insurance, Adam, you can take it away.
Yeah, thanks, Krista. I know we’re getting lots of questions on some of the stuff that we’ve put in, and we’re going to have a Q&A at the end, and we’ll get to as many questions as possible, right, Krista? If we can’t get to them all, we’re going to circle back and answer everybody’s questions, right? Absolutely. Okay, perfect.
Alright, so as Krista said, we’ve thrown a lot at you, at least from a high level. You’ve got an understanding of what the different types of insurance policies are between homeowners, landlord, and renters insurance. So now what I’m going to do is I’m going to start taking a deeper dive into the different types of landlord policies, right?
So, as with any insurance, the coverage you receive is going to depend on the type of insurance policy you select. There are different types of landlord insurance, which, by the way, landlord insurance is commonly referred to as dwelling policies. The three different types are DP1, DP2, and DP3. Alright.
So the first one, DP1, it’s the most basic policy that covers common occurrences, right? So these only cover the named perils. And these perils are, again, the most common, right? So DP1 claims that are covered will only be reimbursed for actual cash value. That’s a big differentiator between this DP1 versus the DP2 and 3 that we’re going to talk about here in a second. But actual cash value means that they’re going to, the insurance company, the claim is going to have depreciation built in, right?
I’ll give you an example here in a minute of a roof and walk through that. But actual cash value is different than full replacement cost. And so this DP1 policy is actual cash value. But because the coverage is so limited in the perils that it covers and the way that it’s reimbursed at ACV instead of full replacement cost, this tends to be the cheapest option, right? But not to be confused with cheapest option, it can, it’s important to note that it’s not necessarily a bad option if you’re the type of landlord or investor who’s going to make the most of making repairs yourself or you just want to get your money back from an investment and you don’t plan to rebuild.
Where it could be a problem is with partial losses, right? So let’s say there’s a hailstorm that takes out your whole roof. This one right now literally hits home with me, no pun intended, since I’m personally going through this as we speak here in the Dallas area. But it’s going to cost you 20k to replace the roof. This is just round numbers. Obviously, it’s, you know, 20,000 dollar roof in some markets. It’s not possible, but 20k to replace your roof.
Unfortunately, you don’t have replacement cost coverage. So under actual cash value like this DP1 policy, it’s going to take into account that your roof’s already 10 years old and so it’s going to be depreciated in half. And all you get is 10k, which isn’t enough to cover the full 20k that it is going to cost to replace.
So DP1, again, a good policy. It tends to be lower premiums, less coverage, but it does cover a lot of common stuff, common perils, so it can be a good policy depending on your risk appetite here.
Next, let’s talk about DP2s. All right, so DP2 is another policy that covers certain named perils. In addition to covering the DP1 common perils that we just showed you, DP2 also protects against other things like burglary damage, frozen pipes, falling objects, and loss of income.
And aside from the additional perils that you get on a DP2 versus a DP1, the biggest differentiator between these is that with the DP2, you’re getting paid out on replacement cost value, meaning the policy will pay to restore the dwelling to its original condition. So in the previous example of needing a new roof from the hailstorm, instead of receiving a lower amount due to depreciation of the 10,000 that we just gave, you’ll actually receive the full 20,000 to replace the roof, obviously less your deductible.
One type of coverage that is available and is often included in DP2 insurance is loss of rents or loss of income coverage. So loss of rents coverage is meant to provide you, the insured, with continuing rental income while the home is being repaired due to damage from a covered peril.
Without loss of rents coverage, if your rental property gets damaged to the point where your renter has to move out while the home gets repaired, you’ll never collect the rent from those months. So loss of rents prevents you, the investor, from having no rental income coming in due to the home damage. It’s a pretty good benefit.
Yeah. And the last but not least, let’s talk about the DP3. So DP3 is the broadest form of protection because of that, it’s the most common and comprehensive landlord insurance policy. So this type of dwelling fire insurance operates as an open peril policy, which means that everything, all perils, are covered unless they’re specifically detailed out as exclusions within your policy agreement.
So DP3 policies can protect the structure of your home, fair rental value, and usually personal liability subject to your agreement. But although the policies cover your home’s main structure, just like the other insurance policies of DP1 and DP2, they do not cover the contents of your home. So that’s something important to note.
Here at Steadly, we write a lot of DP1 and DP3 and a few DP2, but all the options have their purpose. And it’s, again, really just about your investment philosophy and your risk tolerance. So it’s very important to think through that. You know yourself and your risk tolerance, and then it’s important to talk to your agent to talk through the options.
So the most common question that we get is, you know, how much does landlord insurance cost? According to the Insurance Information Institute, landlord insurance costs roughly about 25% more than your typical homeowner’s insurance policy. If, you know, if the average premium, for example, for a homeowner’s policy is around $1,200, we can calculate that a landlord insurance premium should cost roughly $1,500. Again, it’s all going to depend on the type of coverage and the insurance company you go with.
So it’s important to say like, you know, now obviously a house in California will probably cost more than the average because it’s worth twice as much than some markets in the country. And, you know, there are all those pesky wildfires and other, you know, natural forms of perils that come into play, right? So, you know, the more comprehensive your coverage, the more expensive the policy is going to be.
That makes sense. And we have arrived at our second poll of the webinar. We would love to ask you out of the options below, which state do you think offers the cheapest landlord insurance? Somebody jumped right at Idaho right away. Love to see that. Okay.
All the states are getting some love here. That’s good.
Right, starting to even out a little bit. Also important to note, landlord insurance is tax deductible since it’s considered a normal business expense. So make sure that you’re tracking your receipts and have something that you can turn over to your accountant at the end of the year.
All right, folks, I’ll give you 10 more seconds to get your opinions in here. Got about half of you in the mix. I will say this answer surprised me. So I’m curious if you guys will be surprised as well.
All right. So, you guys are thinking that Idaho has the cheapest landlord insurance. That’s not a bad guess. They’re full of potatoes. Why not have a lower insurance premium, right? But the answer is actually Delaware. So it’s only on average $976. But compare that to Colorado, my home state, which boasts the most expensive landlord insurance costs at an average of $4,228. Guess I will be eating ramen for lunch. All right. Very fascinating.
All right. So, you know, the next most common question quickly followed by how much does it cost is how do you reduce the cost, right? How do we get the premium down? And so I’ll talk about a couple of different things here.
First and foremost, property maintenance, right? Insurance companies are very risk-averse. We hate your risks, which means you gotta keep the property up to code to lower the cost of your landlord insurance, right? So some examples is have a maintenance routine that’s followed regularly. Ensure your sidewalks are well-maintained, regularly checked fire escapes, smoke detectors, carbon dioxide detectors, maintain clean walkways, and well-lit hallways.
When it comes to the deductible, raising the deductible makes insurance companies more apt to lower your cost since they know you’ll pick up more of the tab, thus preventing any unreasonable claims. So you can play around with different options on having a higher or low deductible to see how that impacts your premiums.
When it comes to safety, emphasizing the safety measures you’ve taken to boost your property security shows and adds value to your building profile, and really highlight security cameras, efficient lighting systems, alarms, smoke detectors, and you may receive a discounted rate for your efforts. So share all of that with your agent. You never know when it can come into play to reduce your costs.
Another thing is many insurance companies will give a discount if you pay in full instead of monthly installments. And they might also offer a discount if you use a property manager or are a member of a property management association. So those are some other ideas for you.
Fantastic. So, you know, kind of in closing here, right? We’ve gone over quite a bit and hopefully all this has helped you become more knowledgeable on landlord insurance. This is meant to be surface information, not getting too far into the weeds or else, you know, your eyes might glaze over. But hopefully this has been helpful to kind of give you enough to be dangerous, right? To pick the right policy for your property.
Be sure you do your due diligence, but most importantly, ask a lot of questions. Our agents here at Steadly are all very experienced and love getting good questions. So when you’re working with your agent, ask some questions like, are there additional coverages I should add on given my location? Does my policy cover both short and long-term rentals? And by the way, we’ll share some questions with you after the webinar. So don’t worry about frantically trying to write all these down.
But, you know, another question could be, how is the replacement cost or cash value calculated under this policy? We touched on that earlier about how important that is. Are there upgrades or repairs I can do to this property to reduce my insurance costs? Right? Ask that question. Super important and you never know what you’re going to get back. And, you know, a really, really good question. This is always, you know, best practices always ask this is what is not included in my landlord insurance? You know, a lot of folks will ask what is included, but then forget to say what’s not included. So it’s very important to ask those questions.
Also, worth noting that we talked a lot today about the basics of landlord insurance for traditional rentals. We didn’t get into special investments like fix and flips if any of you guys have been investing in those to really, you know, do some renovation on some older properties and turning them into rentals and, you know, maybe even selling them in a short amount of time. But those can be covered as well. It’s just a different type of policy. So again, make sure you communicate with your agent.
And there’s no doubt that adequate insurance coverage can make or break your real estate investing business. So, you know, get quotes, speak with experts, and conduct your own due diligence. That way, you can go to sleep at night, knowing that no matter what happens, you and your business are covered. So with that, I think we’ll turn it over to Q&A, right?
Yeah, absolutely. I’m just to build off of what Adam said there for a moment. If you’re in the market for Landlord Insurance, our partners over at Steadily can help you out. So I will go ahead and drop the link to this page in the chat and then Marilyn, I know you have been buzzing with a question I would love to know what is on your mind. Okay. Let’s see if I can find, I will not make you chat, but let’s see if I can. You know, actually it might be easier Marilyn if you want to put your question in the chat. We can see it and we can help you out with whatever has you raising your hand. We’d love to hear from you. Yeah.
And I believe we do have Andrew Kim from the Steadily team on the line who can, who can take on some of these questions and answer so Andrew if you’re, if you’re available to come off mute and want to take on some of these questions I’d agree.
Yes, absolutely. I’m just going to build off of what Adam said there for a moment. If you’re in the market for Landlord Insurance, our partners over at Steadly can help you out. So I will go ahead and drop the link to this page in the chat. And then Marilyn, I know you’ve been buzzing with a question. I would love to know what is on your mind. Okay. Let’s see if I can find… You know, actually, it might be easier, Marilyn, if you want to put your question in the chat. We can see it and we can help you out with whatever has you raising your hand. We’d love to hear from you. Yeah.
Sure, sure. Yeah, I figured that’d be a little bit easier than typing everything out and tagging everybody, so let’s take a look. Okay, so Susan asked earlier if an umbrella policy will cover the needs. To be honest, none tell us which needs we’re referring to, but basically the umbrella policy will provide access liability coverage over to the underlying policies, which in this case would be the landlord insurance properties. So, for example, if your underlying landlord insurance policy has $500,000 of liability coverage, you could get an umbrella policy to provide excess liability over that 500,000 up to 1 million, 2 million, 3 million, there’s plenty of other options for excess liability. So depending on how many properties you own and how much liability you feel like you’re exposed to you could absolutely purchase additional excess liability coverage. So yeah, in the event of a lawsuit, the liability would kick in after the underlying limits have been met. If your landlord policy, there’s another option where you can exclude landlord, you can exclude liability from the landlord insurance policy and then just get a general liability policy. So the general liability will be a general 1 million or 2 million or whatever limit you choose liability coverage over that property. So, there’s a couple of different ways that you can get liability and excess liability coverage on your investment properties. So if there’s any further questions on that please let me know.
And then what if you’re, so Susan Payne asked, what if your rental is a cottage in your backyard on your property but a separate dwelling, what is needed? That’s actually a fantastic question, so that’s going to vary based on what company you’re getting quotes from. But there are some companies that offer primary homeowners insurance policies with the home-sharing endorsement that Adam had mentioned briefly earlier. So that will allow you to have your primary residence policy for your home that’s living. And then it also states that you will be renting out portions of your home or a separate structure of your home on either a short-term or long-term rental basis. So as long as your carrier or company and agent are aware of how that property is being used, they should be able to guide you into the proper policy required.
Let me see. Steven said, how can you mandate a tenant purchases and maintain the tenant policy, even if you have it in the lease if the policy cancels a landlord really doesn’t have much legal recourse. I’ve never seen an eviction court throw out a tenant because they didn’t have a tenant insurance per the lease. Just curious. So Steven, that’s a great point. When we as insurance agents remind our landlord investor partners to require their tenants to have rental insurance, it’s not really, I mean it could be for coverage against evictions but it’s mostly for liability protection for yourself as an investor and the property owner. So owning the property itself opens you up to a lot of liabilities whether you have it in LLC or not. And so in those examples that Adam shared, you know, any of those things are an absolute possibility they are real-life examples and happen on a daily basis. So we’re really more focusing on protecting your pockets and your investment properties to where if it does burn down because the tenant actually burned it down, you would at least get some payments back instead of having to be out of pocket for all of the costs.
Carson asks, does landlord insurance have additional insurance for rent default? So there is a product or I’m sure there are a couple of different products out there. One of the products available that we know of is called rent guarantee. So that offers coverage for exactly that if the tenant defaults on the rent and isn’t able to pay it. So we’re actually in the process of building that product within our agency here so that we can be able to offer that shortly if it’s not already available.
What does an umbrella. Just Theresa Saris-Rex. Awesome. What does an umbrella insurance policy cover that a landlord policy does not? So the umbrella policy is designed to provide you with excess liability coverage over the landlord. So it’s not necessarily something that covers damage or something that the landlord policy doesn’t cover, it’s meant it’s meant to act coupled to your property policy. So that if you get sued if, for example, you have a tenant pass away in one of your properties and their family sues you for it. And they sue, I mean they’re obviously going to sue you for more than a million dollars someone’s life. So, and you only have $300,000 of liability coverage on your underlying policy. So that’s the policy. Then you pretty much be responsible for the remaining costs out of pocket but with the umbrella, after those 300,000 limits as a met the additional million or 2 million or whatever you purchase will kick in to pay out that amount up to your limits.
Vanessa Peak asks what type of policies are available while in the process of rehabbing a house to be rented in the far near future, that is a fantastic question. So we here at Steadly, and I’m sure some other agents as well, offer a plethora of different products. So when it comes to rehabbing a house, in most cases it’s going to come down to the scope of work. That’s going to depend on what type of policy we need. So just to give you a brief overview, most companies look out for a couple of main points to differentiate between major and minor renovations. So the three main points that they usually look out for is are they changing square footage or the foundation or repairs? Are they changing, adding, removing any load-bearing walls? And are they adding any rooms? So if the answer is yes to any of those questions, more than likely they will be considered major renovations, which would either require a vacant under renovations with builders risk endorsement. Or a traditional builders risk policy. But if it’s any minor renovation, such as interior cosmetic work, changing out the flooring, replacing the roof, changing out windows in most cases, you know, small things like this, they can usually fall under what’s called vacant under renovations for minor. So those policies have a tendency to be a little bit lighter on the premiums, but very similar to a builders risk. So if you’re rehabbing a house, again, depending on the scope of work, there should be a product available for you as long as you disclose your agent all the details, they’ll be able to couple you with a policy.
Albert asks, will a copy of PowerPoint will be sent? Perfect. Oh yeah, you did answer that, sorry. No, he’s… Andrew asks, my tenant holds all over the walls. They hung pictures on that. That deductible against insurance or the security deposit. So what I will
say about that is depends on what kind of coverage you have on the policy. So in this case, I would, it would lead me to believe that if you have vandalism and malicious mischief that it could possibly possibly be covered. And I say that because in every claim scenario it’s going to always come down to the claims adjuster and what’s found at the time of loss. So with that being said, what I usually advise my investors is that they weigh their options versus how much the damage costs to repair against how much their deductible is. Because if your deductible is higher than the cost to repair, repair the damages, then all you’ll be doing is filing a claim on your insurance policy and getting a closed claim with a zero payout. So now you have a zero paid claim with no no future payouts for the loss but now you have a loss history on your claim. And one of the big things to note… Oh, go ahead.
Yeah, I was just sorry I was just going to also jump in here right if we’re talking about hung pictures and holes right if this is this is different than a, than a tenant punching a hole in the wall. Right if we’re talking about stuff at the during the move out process. That’s that’s probably the opportunity to look at the lease language and see what’s required of the tenant to bring it back to the state that it was that had moving. And if there’s an opportunity there to say hey like it’s their responsibility to do that otherwise it’s going to come out of your security deposit. And that’s the better way of doing it because as Andrew said you do a claim against your insurance that’s going to, that’s going to be a claim that could drive up your, your premium and your costs. Yes, excellent point.
Okay, yeah so absolutely even if you have a zero paid claim it could possibly increase your premiums. That’s the unfortunate side effects of that that your agent should be able to discuss with you what your claims options are so I always advise calling your agent before calling the insurance company. Let’s see.
I do want to… I’m sorry, I’m sorry to interrupt. There is one that I think that I saw that I’ll go ahead and take. Let’s see, I think it was Steven that asked, how can you mandate a tenant purchases and maintains a tenant policy even if you have it in the lease? If the policy cancels a landlord really doesn’t have much legal recourse. I’ve never seen an eviction court throw out a tenant because they didn’t have tenant insurance per the lease. Just curious.
Yeah, great question. From a landlord’s perspective, and you know, I’ll give you information, but it’s important to go and seek advice obviously from legal professionals and those who can advise you best. But what I have seen is having it be a requirement at move-in, meaning it’s in your lease that in order to move in and get keys, you have to provide proof that you have renter’s insurance. And then from thereafter in order to track, now it’s not, it has holes, but being listed as additional interest. And so being listed as additional interest, you get notifications if there are changes in that policy. I said there’s holes because some insurance companies out there, right? Like, even though you’re listed as additional interest, you might not get notified. But if you add in some extra steps, like they have to provide that proof every quarter or every six months, and failure to do so could put them in violation of the lease. And then you have that notification to say, you’re in violation of your lease. If you don’t provide this, that’s an important step that could be used later in an eviction.
But with us at Steadly, it could be an advantage. So the talking point could be, you know, Mr. Tenant, in order to rent this property, you have to have an insurance policy that’s covering against accidental damage that you might cause. So you either provide proof that you have that coverage and provide us that proof at move-in and every three months to prove that it’s still active. Or you can go and check out Steadly, who is a partner that we know. And if you get a policy through them at competitive rates and they will list us as additional insured, so it’ll meet your requirements. Just an idea, throwing that out there, but I’m happy to take that offline and we can talk more about that individually. Back to you, Andrew.
Absolutely, thank you, Adam.
All right. Albert, as a landlord, can I buy and pay for my tenant’s rent or liability insurance? So Albert, I mean, what I usually refer to is that it is state-specific and depending on the state guidelines.
As far as I’m aware, on the sale side of things, us as agents cannot pay for the policies, but I haven’t necessarily heard anything as far as property owners paying for them. So unfortunately, on the sale side of things, that’s the best answer I can provide. I would absolutely recommend seeking legal advice for that.
And Andrew also asked, how does price depend on square footage? So whenever we run what’s called a replacement cost estimate or a reconstruction cost estimate to determine what kind of values would be required to rebuild that same property back to the way it was before the damage, every company uses their own calculator, but it usually depends on the square footage, the finishing on the materials, the what kind of material is needed, what kind of material is needed, what kind of frame construction it is, the foundation it has. Excuse me.
So the price is going to vary wildly depending on the state and location that it’s in. I know somebody asked earlier why it’s so high in Colorado. So in certain states, reconstruction costs are just way higher than others. So Colorado, for example, I’ve noticed has a reconstruction cost average of roughly four to five hundred dollars per square foot from everything that I’ve been seeing.
Whereas here in Texas, I’ve seen averages of a hundred, a hundred and twenty dollars per square foot. So it’s going to vary depending on location, what the risk looks like, what kind of disasters have hit it in the past, what could possibly be coming up in the future. So the price per square footage is largely dependent on the finishes.
So if you have like plastic laminate countertops, obviously it won’t be as high as the imported marble from Italy, you know, so. And Vanessa asked, how do you account for the difference in costs? Not entirely sure what you’re referring to. But if you want to clarify, I’m happy to address. Same response for Andrew’s “why is that?” And then.
OK, so I think we have time for one more, Andrew. And then. OK. You know, I think it’s important for everybody to know is like this. We’re giving the information. There’s going to be follow up. Krista, I can talk a little bit more about that here in a minute. But we here at steadily are here to answer all these questions and want to engage with you guys and talk about your individual situations. So.
Thank you. All right. Yes.
So Betty J asked if I own a four unit building and I live in one unit, do I need a homeowner’s policy for my apartment and a landlord policy for each of the other three?
In that situation, Betty, what I would highly recommend is finding a company that has the Home Share Endorsement Program. That would allow for you to list it as a quadplex or units. You primarily reside in one of the units and rent out the other three on either a long-term or short-term basis. So as long as your agent and company are aware, they should be able to match you with a policy that fits that description.
I know we here at steadily have multiple carriers that offer situations for that. But I would definitely check with your agent and your current policy to make sure that it’s written correctly because, and I think we’ve touched on this a little bit earlier, but having the wrong type of policy for your investment could be very detrimental for you.
And just a quick example being that if you have a homeowner’s policy on a property that you’re renting out and, you know, again, we touched on this before, but it could be considered misrepresentation of information on the application, and the company has the right to deny any claims because it is tenant-occupied and not owner as listed.
So having the right type of policy is very important to protect yourself. Nice.
OK, I know we are pretty close to time here. So thank you for all of these great questions.
If you have anything else or if there are questions we didn’t get to, please go follow that link that we dropped in the chat, and we’ll go ahead and drop it again just to make sure you have it. That will get you to steadily. They are one of the best companies you can go to for landlord insurance. They are experts. It’s what they do. Most of their agents, I believe, have five plus years of experience, so you cannot go wrong.
Otherwise, what we’ll do is once this session concludes, you will see a brief survey. It’ll let you choose the next topic of our webinar. It’ll also ask you a couple of questions about how this went for you. And we will send an email with the link to this recording, along with the questions that Adam suggested asking your insurance agent to make sure you have the proper coverage.
Thank you guys so much for being here. We’ve really enjoyed talking with you about landlord insurance. And like I said, go to steadily to get more coverage and make sure that you are ready to go.
Andrew, great joke. Only share what you’re comfortable with. Otherwise, thanks for being here and appreciate it.
Yeah, thanks for having me and thanks for coming, guys. That link that Krista shared, it says get a quote, but just if you put in your information, it’s going to connect you to an agent. So, you know, you don’t necessarily have to worry about like, oh, I don’t want to quote or I’m not really looking for that. Just if you go through the process, you’ll get connected with an agent like Andrew, who can really just help you and answer any questions you have. Fantastic. Thank you, everyone. Thanks, guys. Have a great day.
Welcome to the you need landlord insurance webinar by TurboTenant and Steadily.
My name is Krista Ruther. I am the senior content marketing writer here at TurboTenant. I am joined today by the incomparable Adam Swearingen. Adam is the senior vice president of growth and partnerships at Steadily. So an important guy, we’re very lucky to have him in the mix.
Thanks for having me Krista. It’s an honor. We love TurboTenant. He’s a great partner of ours, but we’re really, really excited to share with you guys everything we’re doing at Steadily, but more importantly to help educate on landlord insurance. So again, thanks for having me excited to be here. Wonderful.
Just a few moments before we begin, we’ll be recording this webinar and sending it out to you after the session concludes. Keep an eye out for an email containing that information. Feel free to ask questions in the chat or through the Q&A section, and we’ll address all those questions at the end of our presentation. So make sure you stick around.
Now, let’s start with the most important topic: What is landlord insurance? Also known as rental property insurance, landlord insurance protects you as a landlord when you rent out your property. It’s distinct from homeowners insurance, and we’ll make sure you understand that by the end of today. Homeowners insurance applies only if you reside in the property, while landlord insurance applies when you do not live there. Combining landlord insurance with renters insurance provides comprehensive coverage, and we’ll delve into this as well. As many people get confused about their insurance needs, we’ll cover landlord insurance, renters insurance, homeowners insurance, and then focus on landlord insurance and its coverage.
Landlord insurance is paid by you, the landlord, a crucial point to note. When you have landlord insurance and your renter has renters insurance, which we’ll discuss, you’ll have peace of mind. What about renters insurance? As the name suggests, renters insurance is coverage paid for by your tenant. It safeguards their belongings against accidents, natural disasters, and more. If a tornado damages their residence and possessions, they can get reimbursed. It also covers malicious actions and litigation against the tenant. For instance, if a guest of theirs gets injured on the property and sues, renters insurance can help cover those costs. Additionally, it includes living expenses if the dwelling becomes uninhabitable, allowing them to afford temporary accommodation.
While the tenant pays for renters insurance, landlords also benefit. When renters lack insurance, they might turn to you for help in emergencies. While you’d want to assist as a good landlord, renters insurance enables them to follow proper channels for reimbursement rather than relying solely on you. It also minimizes legal issues by covering medical bills and legal fees in case of injuries on your property. A poll about renters insurance is available, so let’s take a look. What percentage of tenants do you think have renters insurance? Take a moment to provide your answers. It’s intriguing because not all landlords mandate renters insurance, but we strongly suggest giving it a try if you’re not already. We offer renters insurance through TurboTenna if you’re interested. Take your time with the poll; I’ll wait a bit. Okay, let’s conclude the poll and share the results. Look at that—most of you believe that 10% or less have renters insurance, which is interesting. However, the actual answer is 37% as of this year. So, 37% of tenants have renters insurance. Quite fascinating.
You know, I believe this poll clearly indicates, Krista, that more residents, more tenants need insurance. One crucial step, as you pointed out, is requiring renters insurance through your lease language. This initial move is vital to ensure coverage. Let me provide an example. Sharing examples often aids in understanding insurance concepts, so I’ll walk you through one. Imagine you have a rental home where an electrical shortage leads to a fire. Firefighters arrive and put out the fire, but in doing so, they use a lot of water, causing damage. Let’s say the tenant, Susie, now faces waterlogged furniture and clothes that smell of soot. Unfortunately, Susie doesn’t have renters insurance and holds you, the landlord, responsible for the electrical fire. She asks for $30,000 for new furniture and $5,000 for the Airbnb where she stayed while the home was repaired.
However, your landlord policy doesn’t cover her personal belongings. If she had renters insurance, she could file a claim through her policy, and you wouldn’t need to be involved. Now, let’s fast-forward. After the property is habitable again, Susie throws a housewarming party, and a guest breaks their leg—a sadly common scenario. This time, Susie’s guest is a professional dancer from the Kansas City ballet, with a broken femur in two places. This situation results in a $100,000 claim for medical expenses and lost income. Her renters policy typically covers such liability, but without it, you, the landlord, become the target due to your deeper pockets.
Moving ahead once more, after a lawsuit and stress, Susie decides to light a therapy candle in her room and steps out to Starbucks. Forgetting to blow out the candle, she returns to find half the house in flames. Her renters policy should have covered the damages, but without it, your insurance policy comes into play, potentially raising your deductible and rates. These scenarios, while fictional, mirror real-life events. Many of you probably have similar stories. The key is having adequate coverage to protect everyone involved—Susie, you, and others. Accidents occur, and our goal is to be prepared for them. Absolutely.
Absolutely, those impactful examples highlight the need for both landlord insurance and renters insurance.
Now, let’s shift our attention to homeowners insurance, which is another crucial aspect, although it may not apply as much to landlords. Allow me to delve into this topic further.
A standard homeowners insurance policy covers damage to the building and personal property, along with liability coverage. However, it’s only applicable when you’re residing in the dwelling yourself. If the property serves as your primary residence, homeowners insurance is essential. However, if you’re dealing with a rental unit, you’ll need landlord insurance.
The challenge lies in the fact that these two types of insurance policies often cover similar areas, leading to confusion. It looks like there’s a raised hand—Marilyn, we’ll come back to your question in a moment.
To reiterate, homeowners insurance offers protection against building and personal property damage, as well as liability coverage. Yet, if you’re renting out the property, as I mentioned earlier, landlord insurance is the appropriate choice.
Yeah, Krista, I’d like to chime in here. There’s a significant number of landlords and investors who still hold homeowners policies. What we’ve observed is that much of this stems from not being aware that they should transition to a landlord policy. Oftentimes, this transition occurs unexpectedly, perhaps overnight, when they seize an opportunity to convert their property into a rental.
Frequently, what we notice is that landlords manage to make do with a homeowners policy when they’re not upfront about renting out the property. It might have started unintentionally, but the issue arises when they file their first claim and the insurance company discovers that the property is being rented out to someone else. In such cases, there’s a possibility that the claim will be denied, and the policy might even be canceled. Needless to say, finding oneself in such a situation is highly undesirable. Absolutely, something to be cautious about.
Absolutely, let’s discuss the purpose of landlord insurance. A landlord insurance policy covers the same elements as a typical homeowners insurance policy, with the addition of a couple of specific features that are essential for landlords. It’s crucial to emphasize: the landlord is responsible for paying for landlord insurance, while the tenant is accountable for renters insurance. This distinction is vital because renters insurance offers protection for the tenant’s belongings, ultimately contributing to the overall well-being.
Furthermore, homeowners insurance is the homeowner’s responsibility, but this is applicable only when they actually reside in the dwelling. This summarizes the threefold framework of property insurance—landlord insurance, renters insurance, and homeowners insurance.
You know, one important aspect to note is when you’re renting out a part of your main home. Let’s say you live in the home and you’re renting out a portion to a tenant. In this scenario, you require landlord insurance, and your tenant needs renters insurance. It’s worth mentioning that certain homeowners policies might include a home share exclusion. This means that even if you reside in the home and rent out a portion, you might not necessarily have coverage. It’s vital to understand this point.
As you’ll hear us emphasize throughout today, it’s crucial to check with your insurance agent before renting out any part of your property. Ensuring that you have comprehensive coverage is key. The emphasis here is on checking with your agent. Communication and asking questions are essential because there might be exceptions or exclusions you’re not aware of. It’s best to be informed before you find yourself in a situation where coverage is required urgently. Absolutely.
Absolutely, when in doubt, reaching out to your agent is the way to go. They’ll have all the necessary details. Now that we’ve explained the significance of landlord insurance, let’s delve into the benefits it offers.
The main advantage of having landlord insurance is reducing out-of-pocket costs. This not only strengthens your bottom line but also contributes to your peace of mind. Additionally, liability protection shields you from legal or medical fees if a tenant or their guests get injured on your property—as we’ve exemplified earlier. Tenants might seek compensation for various reasons, ranging from physical injuries and fatalities to financial difficulties and emotional distress. With liability coverage, potential expenses for legal or medical fees are covered, providing a safety net against unexpected costs.
Furthermore, rental income protection provides a buffer in case an incident renders your property uninhabitable. Situations like fire, mold, or tornado damage could lead to substantial financial losses. Rental income protection steps in to compensate you for the income you’d otherwise lose due to the property’s unavailability. Usually, this coverage extends for a specified duration, often around 12 months. When obtaining a policy, it’s important to consult your agent to understand the coverage thoroughly, including rental income protection. Adding rental income protection to your policy is highly recommended.
Lastly, it’s worth mentioning certain tenant damage coverage. This coverage addresses two types of tenant-caused damage: accidental and malicious or intentional damage. While some policies include coverage for malicious damage caused by tenants, it’s advisable to confirm this with your agent. Remember that insurance policies don’t cover regular wear and tear. So, tasks like replacing carpets or repainting after each tenant transition wouldn’t typically be covered.
Now, let’s explore what landlord insurance actually covers. A comprehensive policy usually encompasses three primary protections. First is property damage protection. This covers damage to the property caused by natural disasters, vandalism, theft, irresponsible tenants, and other factors that could harm the physical structure. It’s worth noting that not all policies are the same. Basic policies might only cover specific perils such as fire, lightning, smoke, and hail. In contrast, broader policies cover everything except what’s explicitly excluded. However, most policies these days include a COVID-related exclusion.
Next, there’s loss of rental income or rental income protection. This aspect comes into play when your property becomes uninhabitable, as we discussed earlier. It provides temporary reimbursement for rental income, compensating for the income you would’ve received if a tenant could occupy the dwelling. Although it’s a challenging situation, ensuring your financial stability is crucial. An important note is that you can’t charge the insurance company more than what you would’ve earned in rent. If your tenant paid $500 monthly, you can’t suddenly demand $1,000. The reimbursement aligns with the actual rent amount.
Finally, liability coverage, the third significant aspect, covers medical or legal expenses, including lawsuits, bodily injury claims, and settlement costs, if a tenant or visitor sustains injuries on your property.
Beyond these core coverages, there are additional options to enhance your protection. For instance, flood damage insurance covers damage resulting from floods. Keep in mind that flood insurance is often separate from the general policy and needs to be added. Guaranteed income insurance, also known as rent guarantee, covers partial or full rent payments if a tenant can’t pay for a month. This was especially relevant during the peak of the COVID pandemic. Personal property coverage is available for furnished units, protecting your furnishings. This can be adjusted to cover your specific furniture. If your unit is unfurnished, a small amount of personal property coverage can still be carried for appliances and other items.
Now, let’s address what landlord insurance doesn’t cover. Although it offers extensive protection, there are limitations. It doesn’t cover your tenant’s belongings, highlighting the importance of requiring renters insurance. Additionally, as mentioned earlier, normal wear and tear aren’t covered. This refers to damage or deterioration resulting from regular use. Replacing carpets or addressing minor wear and tear that’s expected from ordinary usage won’t typically be covered. Lastly, if the homeowner isn’t renting out any part of their property and lives there, that portion won’t be covered under landlord insurance. In such cases, homeowner’s insurance is appropriate.
I hope this clarifies the details for you. Now, moving on to a more in-depth exploration of the different types of landlord insurance. Adam, take it away.
Yeah, thanks, Krista. We’re seeing lots of questions, and we’ll be addressing them in our Q&A session. Rest assured, we’ll get to as many questions as possible, right, Krista?
Absolutely, that’s correct. If we can’t cover all the questions during this session, we’ll make sure to circle back and answer each one.
Perfect, thanks. Alright, as Krista mentioned, we’ve covered a lot of ground, providing you with a high-level understanding of different insurance policies—homeowners, landlord, and renters insurance. Now, I’ll take a deeper dive into the various types of landlord policies. First off, when selecting an insurance policy, remember that the coverage you receive depends on the policy type you choose. There are different types of landlord insurance, often referred to as dwelling policies. Let’s delve into the three primary categories: DP1, DP2, and DP3.
Starting with DP1, it’s the most basic policy, covering common occurrences. This policy solely encompasses named perils, which are the most common ones. Claims covered by DP1 are reimbursed at actual cash value (ACV). This is a significant distinction from DP2 and DP3, which I’ll explain shortly. ACV includes depreciation. For instance, consider a roof. If your policy is DP1 and your roof is 10 years old, the claim payout will factor in the depreciation, like a 10k payout for a 20k roof replacement. DP1 tends to be the cheapest option, offering limited coverage. It’s a good choice for hands-on landlords or those who don’t plan to rebuild. However, it might pose challenges with partial losses. If a hailstorm damages the roof, you might not receive enough to cover the full replacement cost.
Moving on to DP2, this policy covers named perils like DP1 but extends coverage to additional events such as burglary damage, frozen pipes, falling objects, and loss of income. The crucial difference is that DP2 payouts are based on replacement cost value. This means the policy covers restoring the dwelling to its original state. For instance, in the previous roof scenario, you’d receive the full 20k replacement cost, minus your deductible. DP2 often includes loss of rents coverage, ensuring you receive rental income while your property is repaired due to covered damage.
Lastly, let’s discuss DP3. It’s the broadest form, functioning as an open peril policy. This means all perils are covered unless specifically excluded. DP3 protects your home’s structure, fair rental value, and typically personal liability. However, like DP1 and DP2, it doesn’t cover your home’s contents. Each option has its purpose, aligning with your investment philosophy and risk tolerance. Talking to your agent is essential to navigate the choices.
Common questions arise about the cost of landlord insurance. According to the Insurance Information Institute, landlord insurance is about 25% pricier than regular homeowner’s insurance. If the average homeowner’s premium is $1,200, a landlord insurance premium would be around $1,500. Keep in mind, the cost depends on coverage type and the insurance company. Factors like location and potential natural disasters also play a role. More comprehensive coverage generally translates to a higher policy cost.
Now, it’s time for our second poll of the webinar. We’re excited to hear your opinions. Among the options provided below, which state do you believe provides the most cost-effective landlord insurance? We’re already seeing quick responses for Idaho. Let’s continue to gather your answers!
All the states are getting some love here. That’s good.
Indeed, the responses are evening out a bit. Also, it’s important to highlight that landlord insurance is tax deductible as it falls under regular business expenses. Remember to keep your receipts organized so you can provide them to your accountant at the end of the year.
Alright, let’s give it another 10 seconds for those of you who haven’t shared your opinions yet. About half of you have participated thus far. I must say, I was a bit surprised by the answer myself. Let’s see if you find it equally surprising.
Okay, it appears that most of you believe that Idaho offers the most economical landlord insurance. That’s a reasonable assumption, given the potato connection. Maybe that translates to lower insurance costs, right? However, the actual answer is Delaware, where the average cost is just $976. In comparison, Colorado, my home state, takes the lead in high landlord insurance costs, averaging $4,228. It seems like I’ll be embracing a ramen lunch soon. Fascinating findings!
Alright, moving on. So, one of the next commonly asked questions that follows closely after: “How much does it cost?” is “How can I lower the cost?” Let’s discuss a few strategies.
First and foremost, property maintenance is key. Insurance companies are risk-averse, so maintaining your property to code standards can help reduce your landlord insurance premium. Implement a maintenance routine, keep sidewalks well-maintained, ensure fire escapes are functional, install smoke detectors and carbon monoxide detectors, and maintain well-lit hallways.
Adjusting your deductible can also impact your premium. Opting for a higher deductible means you’re willing to shoulder more of the cost, leading to potentially lower premiums. Safety measures play a significant role. Highlight the security measures you’ve put in place, such as security cameras, efficient lighting systems, and alarms. These efforts can earn you discounts on your insurance rate.
Moreover, some insurance companies offer discounts if you pay your premium in full rather than monthly installments. You might also receive a discount if you use a property manager or are a member of a property management association. These are additional avenues to explore for cost reduction.
Excellent. So, wrapping up here, we’ve covered a lot of ground, and hopefully, this information has empowered you with a better understanding of landlord insurance. Our aim was to provide you with a surface-level overview without diving too deep into the specifics. It’s about arming you with enough knowledge to make informed decisions when selecting the right policy for your property.
Remember to conduct thorough research and, most importantly, ask plenty of questions. Our Steadily agents are experienced and love fielding insightful questions. During your discussions with them, consider asking about additional coverage options based on your location, coverage for both short and long-term rentals, replacement cost versus cash value calculations, and any potential property upgrades that could lower insurance costs.
An essential question to ask is also what’s not included in your landlord insurance coverage. This comprehensive approach is crucial. It’s worth mentioning that while we’ve focused on the basics of landlord insurance for traditional rentals today, we haven’t delved into specialized investments like fix-and-flip properties. If any of you are involved in such ventures, where you renovate older properties for rental or sale, these require distinct coverage.
Ensure you maintain clear communication with your agent to tailor your insurance accordingly. Undoubtedly, having adequate insurance coverage can significantly impact your real estate investment business. Obtain quotes, consult experts, and carry out thorough research, so you can rest easy knowing that your business and assets are well protected.
With that, I believe we’re ready to move on to the Q&A session.
Sure, no problem. Continuing from what Adam mentioned, if you’re interested in Landlord Insurance, our partners at Steadily can provide assistance. I’ll drop the link to this page in the chat. And Marilyn, it seems like you have a question that you’ve been eager to ask. Feel free to type it in the chat, and we’re here to help with whatever you’re curious about. Your engagement is valuable to us.
And it appears we have Andrew Kim from the Steadily team present, ready to address any questions you might have. Andrew, if you’re ready, feel free to unmute yourself and assist with these inquiries. We’re here to assist!
Sure, sure. Yeah, I figured that’d be a little bit easier than typing everything out and tagging everybody. Let’s take a look.
Okay, so Susan asked earlier if an umbrella policy will cover the needs. To be honest, none of us knows which needs we’re referring to. But basically, the umbrella policy will provide excess liability coverage over the underlying policies. In this case, it would be the landlord insurance properties. So, for example, if your underlying landlord insurance policy has $500,000 of liability coverage, you could get an umbrella policy to provide excess liability over that $500,000, up to $1 million, $2 million, $3 million. There are plenty of other options for excess liability. Depending on how many properties you own and how much liability you’re exposed to, you could purchase additional excess liability coverage.
So, in the event of a lawsuit, the liability would kick in after the underlying limits have been met. There’s another option where you can exclude liability from the landlord insurance policy and then just get a general liability policy. The general liability will be a general $1 million or $2 million, or whatever limit you choose, liability coverage over that property. There are a couple of different ways to get liability and excess liability coverage on your investment properties.
If there are any further questions on that, please let me know. And then, what if your rental is a cottage in your backyard on your property but a separate dwelling, and you’re wondering what is needed? That’s actually a fantastic question, and it will vary based on the company you’re getting quotes from. Some companies offer primary homeowners insurance policies with a home sharing endorsement. This allows you to have your primary residence policy for your living space and states that you’ll be renting out portions of your home or a separate structure on either a short-term or long-term basis. As long as your carrier or company and agent are aware of how the property is being used, they should guide you to the proper policy required.
Moving on, Steven raises a point about mandating tenants to purchase and maintain tenant policies. He’s curious about the legal recourse if a tenant policy cancels and how it impacts the landlord. When insurance agents advise landlords to require tenant insurance, it’s primarily for liability protection for the investor and property owner. Owning the property exposes you to various liabilities, so tenant insurance helps safeguard your investment. While it might not directly lead to eviction, it focuses on protecting your properties in case of unforeseen events.
Carson’s question is about additional insurance for rent default in landlord insurance. There’s a product called rent guarantee, which offers coverage if a tenant defaults on rent. Some agencies, like ours, are in the process of building such products to offer landlords more protection.
Moving on to umbrella insurance, it’s designed to provide excess liability coverage over your property policy. It’s not about covering what landlord policies don’t; it’s about enhancing your coverage. For instance, in a tragic scenario where a tenant passes away and their family sues for more than your underlying policy covers, the umbrella policy would kick in after the underlying limits are met.
Vanessa’s question pertains to policies for houses being rehabbed for future rental. The type of policy depends on the scope of work. Major renovations might require vacant under renovations or builders risk coverage. Minor renovations could fall under vacant under renovations policies. Your agent will guide you based on project details.
Albert inquires about a copy of a PowerPoint. Andrew asks about a tenant damaging walls. It depends on your coverage. Vandalism might be covered, but consider deductible and repair costs. Filing a claim for an amount lower than your deductible isn’t always beneficial, as it leaves a claim history with no payout.
Certainly, I understand. Just wanted to add a quick note here regarding hung pictures and holes, particularly during the move-out process. This situation is distinct from a tenant causing intentional damage to the property. When addressing this scenario, it’s valuable to review the lease terms and requirements. If the lease states that tenants must return the property in the same condition as move-in, then there’s an opportunity to communicate that responsibility to tenants. If they don’t fulfill this obligation, the cost of repairs can be deducted from their security deposit. This approach is more favorable than filing an insurance claim. As Andrew mentioned, filing a claim can potentially raise your premiums and overall costs. Thank you for raising this point.
Absolutely, you’ve highlighted a crucial aspect. Even if a claim results in a zero payout, it could still lead to increased premiums. This is one of the potential downsides of making a claim. It’s a good practice to discuss your claims options with your agent beforehand. I recommend reaching out to your agent before contacting the insurance company directly. Your agent can provide guidance on the best course of action. Let’s continue discussing your questions.
I do want to. I’m sorry, I’m sorry to interrupt. There is one question that I think I saw, and I’ll go ahead and address it. It was from Steven, who asked how a landlord can mandate that a tenant purchases and maintains a tenant policy, even if it’s in the lease. If the policy cancels, the landlord doesn’t have much legal recourse. I’ve never seen an eviction court throw out a tenant because they didn’t have tenant insurance per the lease. Just curious.
Yeah, that’s a great question. From a landlord’s perspective, and I’ll provide information, but it’s important to seek advice from legal experts who can guide you best. What I have seen is making it a requirement at move-in. This means having it in your lease that tenants must provide proof of renter’s insurance to receive keys and move in. To further track it, you can list yourself as an additional interest on the policy. This way, you receive notifications if there are any changes to the policy. There are some gaps here because not all insurance companies provide notifications even if you’re listed as additional interest. Adding extra steps, such as requiring proof every quarter or six months, can help. If a tenant fails to provide proof, it could be a violation of the lease, which can be crucial later in an eviction process.
At Steadly, for instance, you could leverage this requirement. You can explain to tenants that to rent the property, they need insurance to cover accidental damage they might cause. They must provide proof of coverage at move-in and every three months to ensure it’s active. Alternatively, they can check out Steadly, a partner we know. They offer policies at competitive rates and will list us as additional interest to meet your requirements. Just throwing that idea out there. Feel free to reach out separately, and we can discuss this further.
Back to you, Andrew.
Absolutely, thank you, Adam.
All right. Albert, as a landlord, can I buy and pay for my tenant’s rent or liability insurance? So, Albert, what I usually refer to is that this can be state-specific and dependent on state guidelines. As far as I’m aware, on the sales side of things, us as agents cannot pay for the policies. However, I haven’t necessarily heard anything about property owners paying for them. Unfortunately, on the sales side of things, that’s the best answer I can provide. I would recommend seeking legal advice for that.
Andrew also asked, how does price depend on square footage? When we run a replacement cost estimate or a reconstruction cost estimate to determine the values needed to rebuild a damaged property back to its original state, each company uses its calculator. It typically takes into account square footage, finishing materials, frame construction type, foundation type, and more. The price varies based on the state and location. For instance, in Colorado, reconstruction costs are much higher, around four to five hundred dollars per square foot, while in Texas, it’s around a hundred to a hundred and twenty dollars per square foot. Price per square footage is greatly influenced by finishes; for instance, plastic laminate countertops versus imported marble from Italy.
Vanessa asked, how do you account for the difference in costs? I’m not entirely sure what you’re referring to, but if you clarify, I’m happy to address it. Similar response for Andrew’s question about why costs vary.
Okay, so I think we have time for one more question, Andrew. And then…
You know, I believe it’s important for everyone to understand that we’re providing information here, and there will be follow-up discussions. Chris, I can provide more details on that shortly. At Steadily, we’re here to address all these questions and engage with you all to discuss your specific situations.
Thank you. All right. Yes, so Betty J asked, if I own a four-unit building and I live in one unit, do I need a homeowner’s policy for my apartment and a landlord policy for each of the other three?
In that situation, Betty, I highly recommend finding a company that offers the Home Share Endorsement Program. This would allow you to list it as a quadplex or units. Since you primarily reside in one unit and rent out the other three either long-term or short-term, as long as your agent and company are aware of this setup, they should be able to provide you with a policy that aligns with this description. At Steadily, for example, we work with multiple carriers that offer solutions for situations like this.
However, I advise you to check with your agent and review your current policy to ensure it’s accurately written. As we discussed earlier, having the wrong type of policy for your investment property could have significant consequences. To illustrate, having a homeowner’s policy on a property you’re renting out might be considered misrepresentation on the application. In such cases, the insurance company can deny claims due to the tenant occupancy not matching the owner occupancy listed. Having the right policy type is crucial for your protection. Nice.
Okay, I know we’re pretty close to the end of our time here. Thank you all for these fantastic questions. If you have anything else to ask or if there are questions we didn’t address, please use the link we provided in the chat. We’ll drop the link again just to ensure you have it. This link will take you to Steadily, which is one of the best companies for landlord insurance. They’re experts in this field, and most of their agents have five plus years of experience. You can’t go wrong with them.
In case we didn’t get to your questions or you need more detailed information, consider checking out Steadily through that link. Moving forward, once this session concludes, a brief survey will appear. You can use this survey to select the next topic for our webinar. Additionally, it will ask a couple of questions about your experience with this session. We’ll also send you an email containing the link to this recording and the questions that Adam suggested for discussing coverage with your insurance agent.
Thank you all so much for joining us. We’ve truly enjoyed discussing landlord insurance with you. As Adam mentioned, go to Steadily for more coverage and to ensure you’re well-prepared. Andrew, your joke was great. Remember, only share what you’re comfortable with. Thank you for attending, and we appreciate your participation.
Yeah, thanks for having me, and thank you all for attending. That link Krista shared might say ‘get a quote,’ but if you enter your information, it will connect you with an agent. So, don’t worry about thinking you’re obligated for a quote. By going through the process, you’ll be connected with an agent like Andrew, who can provide assistance and address any questions you have. Fantastic.
Thank you, everyone. Thanks, guys. Have a wonderful day.
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