About the Presenters
You Need Landlord Insurance
May 12, 2022
Every property owner knows the importance of insurance, but do you know the ins and outs of landlord insurance? In this webinar, we broke down the purpose of landlord insurance, how it can help protect you as you grow your rental business, and why you need it.
KRISTA You Need Landlord Insurance! A webinar by TurboTenant and Steadily. So my name is Krista Reuther. 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. ADAM Thanks. Thanks for having me, Krista. And it's an honor. We love TurboTenant, they're 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, plan, or to chat. So again, thanks for having me. Excited to be here. KRISTA Wonderful. So just a couple of thing before we start, we are going to go ahead and record this webinar for you and send it out after the session ends. So 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 be sure to stick around. KRISTA All right. So first off, most important, what is landlord insurance? Landlord insurance is also known as rental property insurance. And it basically protects you as a landlord when you are renting out your property to others. It's different than homeowner's insurance. And we will make sure you know that by the end of today! Homeowner's insurance only applies if you live in the property. KRISTA Landlord insurance only applies if you do not live in the property. So landlord insurance and renters insurance in conjunction is a winning combination that covers you on all fronts. And we will also dig into that as well. Since many people get confused about the types of insurances that they need. We look at landlord insurance, renters insurance, homeowners insurance, and then we'll talk more about landlord insurance and what it covers. KRISTA So landlord insurance is paid for by you as the landlord, which is very important to note. As long as you have that and renters insurance from the renter too, you should be in a good spot to sleep well at night. There we go. So what is renters insurance? Renters insurance is, as you might have guessed, insurance that your renter pays for. KRISTA And it protects their items. So it protects them against things like accidents, natural disasters. If a tornado sweeps through town and it destroys their residence and their things, they can get reimbursed. Malicious actions, litigation against the renter. So let's say that somebody comes onto the property, one of their guests, and falls and breaks their leg. If that person then tried to sue your renter, their renters insurance would cover some of that cost. KRISTA It also covers additional living expenses. So if for some reason the dwelling was uninhabitable, that would allow them to, you know, pay for a hotel room or something where they could stay. The tenant pays for renters insurance, but you as a landlord benefit as well, mostly because when your renters don't have renters insurance, their first inclination may be to come to you and ask for help when something goes wrong. KRISTA As a good landlord, of course you want to help them out, but if they have renters insurance, they can go through the proper channels and get reimbursed that way rather than leaning on you first. It also helps reduce legal issues. Like I said, if somebody gets injured on your property, since it can cover both legal fees and medical bills if someone gets injured on site. KRISTA We do have a poll for you about renters insurance, so we'll see if we can get that pulled up here. All right. So what percentage of tenants have renters insurance, do you think? KRISTA There are some answers pouring in. Well, let's go for a little bit. It's fascinating to me because not all landlords require renters insurance. But we do highly recommend that if you're not currently requiring it, give it a shot. We do offer some renters insurance through TurboTenant, if you are interested. ADAM All right. KRISTA Let's let folks pour in, give you ten more seconds. ADAM Feeling generous. KRISTA Now. Okay. KRISTA All right. Go ahead. And the poll shares these results. Look at that. So most of you think that 10% or less have renters insurance, which is fascinating, but the answer is actually 37% as of this year. So 37% of tenants have renters insurance. ADAM Interesting. You know, I think obviously what these what this poll's telling us, Krista, is that we recognize that more residents, more tenants need to get insurance. Right. I think something you hit on is incredibly important and a good first step, which is trying to require some form of renters insurance. Right. So in your lease language, getting language in there that requires it is is a really good first step to to to require that. ADAM Let me give you an example. I think this will maybe help help give some color around how it how it can complement a landlord policy and why it's important. Right. So I think giving examples when it comes to insurance is usually the thing that helps it click in everyone's mind. So I'll walk through an example for you, right? ADAM So this is kind of off the cuff, but let's let's say that you have a rental home and there's an electric shortage that causes the fire. Firefighters come, they put it out, obviously spraying a lot of water through the hose right. To to get the fire out. But in doing so, it's going to water log all of, let's say, Suzy, right. ADAM Suzy is the renter. Suzy's furniture is going to now be waterlogged. Her clothes are going to smell like soot, you know, and Suzy, unfortunately, doesn't have a renter's policy and wants to hold you, the landlord responsible for the electrical fire. Right. And so she's coming to you asking you pay her $30,000 for new furniture, reimburses $5,000 for the Airbnb that she had to stay in for six weeks while the home was being repaired. ADAM And unfortunately, your landlord policy does not cover her personal property. And so what then happens is, you know, she's going to you know, if she had a policy, she'd be able to submit a claim and it would be taken care of through her policy. And you wouldn't have to touch it. All right. So now let's say let's fast forward, right? ADAM Let's say that you finally get the property inhabitable and Suzy can move back in. She's excited. She throws a housewarming party and then, you know, she's got a guest over kind of like Krista said, a guest breaks their leg. It's very common, unfortunately. Right. And, you know, unfortunately, Suzy has somebody over at her house breaks her leg or femur in two places. ADAM And even more, unfortunately, her guest turns out to be a professional dancer in the Kansas City Ballet. All right. So, you know, professional dancer with a broken leg, not exactly a good combination, right? So she heard. So her friend Suzy is $400K in medical expenses and lost income. Right. Normally, Suzy's renter's policy would cover cover it and cover liability and step in. ADAM But since she's not carrying renters insurance, there's no money to be had. So guess who her friend's savvy lawyer is going to turn to? It's going to be you, the landlord, right? Somebody with deeper pockets than than Suzy. All right. So again, another scenario. Fast forward after all the stress, the lawsuit Suzy decides to write in a letter, aromatherapy candle to de-stress. ADAM Right. And then she runs out to Starbucks to grab a Frappuccino, forgets to blow the candle out, when she comes back half the house is up in flames. So her renter's policy should have covered the liability for the actual damages. But since she doesn't have a policy, you get stuck in turn having to use your insurance policy which can drive up your deductible and increase your rates. ADAM Right. So all of those kind of examples is things that happened. Right. I'm sure a bunch of you guys have stories just like that, but it's important to have levels of coverage to protect everybody. Right. So it's important for Suzy. It's important for you. Accidents happen. And that's what we're preparing for. KRISTA 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 homeowner's insurance. That's another important piece of the puzzle, although not one that's going to pertain too much as a landlord. A standard homeowner's insurance policy covers the building and personal property damage, as well as liability. But it only applies if you live in that dwelling. KRISTA So if it's your primary dwelling, you need homeowner's insurance. If it's your rental unit, you need landlord insurance. And it's challenging because they cover similar things. They comfort you. Oh, someone's raised their hand. We will circle right back around to Marilyn. So homeowner's insurance is going to be a standard policy that will protect against building and personal property damage and liability. KRISTA But if you're rented out, like I said, only, wow. Getting all kinds of scrambles, I'm too excited about insurance. So if you don't take the landlord insurance. ADAM Yeah. Krista, I think I'll jump in here. There is a lot of landlords and investors that have homeowner's policies and a lot of it we find this 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 outright. It just kind of happened overnight and they took advantage of an opportunity to turn into a rental. ADAM You know, I think what we find often is that as landlords, you can get by with buying a homeowners policy if the insurance company doesn't know you're renting it out. But as soon as they start investigating first 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. ADAM And that's that one situation you don't want to be in. KRISTA Absolutely. ADAM Okay. KRISTA So the purpose of landlord insurance, a landlord insurance policy covers the same things that a general homeowner's insurance policy covers. In addition to a couple other specific things that you would need as a landlord. With that in mind, I can't stress this enough. Landlord pays for landlord insurance, tenant pays for renters insurance because that protects their belongings. And bottom line, should the need arise, homeowner insurance is paid for by the homeowner, but only if you live in that dwelling. KRISTA That is the trifecta of insurance regarding properties. ADAM You know, one thing, something in common again here, right, like, you know, if you're renting out part of your main home, right. Like so say you live in the home and you're renting part of it out to a tenant. You know, you need landlord insurance and your tenant needs renters insurance. There are some homeowner's policies that may have a home share exclusion. ADAM Right. So that's important to know is, you know, just because you're living in the home and you may be renting a portion out, you might not necessarily be covered. Right? So you'll hear a status quite often today. Check with your agent before running out of room to ensure you're fully covered. Write the key part be check with your agent. ADAM 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 when you actually really need them. Right? KRISTA Absolutely. Yes. When in doubt, check in with your agent. They're going to have all of 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 peace of mind. KRISTA 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 to tenants can sue for a payout or for 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. KRISTA 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 you're dwelling is uninhabitable, but you have this protection, you will get some of that back. KRISTA 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? KRISTA There are two types of damage that can be caused by a tenant. There's accidental and malicious or intentional damage. So some policies include malicious damage caused by the 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 and repaint every time someone puts out. ADAM Absolutely. KRISTA 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 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 parts of the property. But not all policies are created equal. KRISTA 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, should also cover loss of rental income slash rental income protection. So should something occur that causes your property to be uninhabitable? KRISTA 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 to rent or pay for rent. KRISTA So if your monthly rent costs $500 a month and that's what your tenant pays, you cannot go to Steadily and say, Hey, why don't you pay me $1,000 a month instead? Not quite how it works. You're only getting a 1 to 1 reimbursement there. Lastly, 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. KRISTA There are, of course, additional coverage options that you may want to pursue to further protect your investment. For example, flood damage, flood insurance, which would cover any kind of damage that's 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 can usually be purchased through your same agent. KRISTA It's guaranteed income insurance, a.k.a. 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. KRISTA So this is usually available in everyday life 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? KRISTA As you can 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. KRISTA 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. It's not going to be covered under landlord insurance if they're not renting out any portion of it, because that would fall under homeowner's insurance. KRISTA At that point, you would really nail it in for you. All righty. And now to do a deeper dove into the different types of landlord insurance and take it away. ADAM Yeah. Thanks, Krista. I know we're we're getting lots of questions on some of the stuff that we've 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 perfect. ADAM All right. So as Krista said, you know, we've thrown a lot, at least from a high level. You've got an understanding of what the different types of insurance policies are between homeowner's landlord and renters insurance. So now what I'm going to do is I'm going to start taking a deeper dove into the the different types of landlord policies. ADAM Right. So as it as with any insurance, the coverage you receive is going to depend on the type of insurance policy you select, the different types of landlord insurance, which, by the way, landlord insurance is commonly referred to as dwelling policies, the three different types, three different categories that these dwelling policies fall into is deep one, two and three. ADAM All right. So the first one, deep one, it's the most basic policy that covers common occurrences. Right? So these these only cover the named perils. And these perils are, again, the most common, right? So deep one claims that are covered will only be reimbursed for actual cash value. That's a big differentiator between this one versus the type two and three that we're going to talk about here in a second. ADAM But actual cash value means that they're going to the insurance company. The claim is going to have depreciation built in. Right. So I'll give you an example here in a minute of a roof and you walk through that. But actual cash value is different than full replacement cost. And so this deep one policy is actual cash value. But because the coverage is so limited and the perils that it covers and the way that it's reimbursed that ACV Instead of full replacement cost, this tends to be the cheapest option, right? ADAM 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. ADAM All 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 20 grand to replace the roof. This is just round numbers. Obviously, it's, you know, $20,000 roof in some markets. ADAM 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 one policy is going to take into account that your roof started ten 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 and that is going to cost to replace. ADAM So DP one again a good policy, it tends to be lower premiums, less coverage, but it does cover a lot of the common stuff, common perils. So it can be a good policy depending on your your risk appetite here. Next, let's talk about DP tubes, right? So DP two is another policy that covers certain named perils. In addition to covering the DP, one common perils that we just showed you. 00:21:26:16 - 00:21:54:12 ADAM DP two 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 DP two versus a VP one, the biggest differentiator between these is that with the DP two, you're getting paid out on replacement cost value, meaning the policy will pay to restore the dwelling to its original condition. 00:21:54:24 - 00:22:19:06 ADAM So in the previous example of needing a new roof from the hailstorm instead of receiving a lower amount due, it did a 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 one type of coverage that is available and is often included in DP two insurance is loss of rents or loss of income coverage. 00:22:19:20 - 00:22:38:22 ADAM So loss of rent 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 rental coverage. If your rental property gets damage to the point where your renter has to move out, all the homes get repaired, you'll never collect the rent from those months. 00:22:38:22 - 00:22:48:13 ADAM So loss of rents prevents you, the investor, from having no rental income coming in. Coming in due to the home damage. 00:22:49:02 - 00:22:50:22 KRISTA Yeah, it's a pretty good benefit. 00:22:51:06 - 00:23:21:12 ADAM Yeah. And the last but not least, let's talk about the DP three. Right. So DP three is the broadest form of protection because it's, you know, and because of that, it's the most common and comprehensive landlord insurance policy, right? So this, 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. 00:23:22:13 - 00:23:45:20 ADAM So, you know, DP three policies can protect the structure of your home for rental value and usually personal liability subject to your agreement. But all of the policies cover your home's main structure, just like the other insurance policies of DP one and DB two. They do not cover the contents of your house, right? So that's something important to note here. 00:23:45:20 - 00:24:12:23 ADAM At Steadily, we write a lot of DP one and DP three and a few DP two, but all the options have their purpose. And it's again, really just about your investment philosophy and your risk tolerance. So, you know, it's very important to think through that, you know, you know yourself and your your risk tolerance. And then it's important to talk to your agent, to talk through the options. 00:24:12:23 - 00:24:39:12 ADAM So most common question that we get is, you know, how much does landlord insurance costs? According to the Insurance Information Institute, landlord insurance costs roughly about 25% more than your typical homeowner's insurance policy. If the average premium, for example, for a homeowner's policy is around 1200 dollars, we can calculate that a landlord insurance premium should cost roughly 1500 dollars. 00:24:40:16 - 00:25:05:09 ADAM 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, you know, 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's all those pesky wet wildfires and other, you know, natural forms of of perils that come into play. 00:25:05:10 - 00:25:12:10 ADAM Right. So, you know, the more the more comprehensive your coverage, the more expensive the policies are going to be. 00:25:13:11 - 00:25:37:11 KRISTA That make 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. 00:25:37:18 - 00:25:40:00 ADAM All the states are getting some love here. That's good. 00:25:40:00 - 00:26:01:05 KRISTA Right? It's 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 for. All right, folks, I'll give you ten more seconds to get your opinions in here. 00:26:03:04 - 00:26:33:12 KRISTA 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. It's not a bad guess. They're full of potatoes. Why not have a lower insurance premium rate? But the answer is actually Delaware. 00:26:33:15 - 00:26:53:09 KRISTA 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. 00:26:53:09 - 00:27:17:04 ADAM 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 how do we get the premium down? You know, and so I'll talk about a couple of different things here. You know, first foremost, property maintenance. Insurance companies are very risk averse, right? 00:27:17:04 - 00:27:53:22 ADAM We, you know, hate risk, which means you got to keep the property up to code to lower the cost of your landlord insurance. Right. So some examples is, you know, have a maintenance routine that's followed regularly. Ensure your sidewalks are well-maintained regularly. Check fire escapes, smoke detectors, carbon dioxide detectors, maintain clean walkways and well-lit hallways. When it comes to the deductible, you know, 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 plans claims. 00:27:54:04 - 00:28:18:15 ADAM So you can play around with different options on having a high 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 discounted rate for your efforts right? 00:28:18:15 - 00:28:36:07 ADAM So share all of that with your agent. You never know where when it could come into play to reduce your costs. And, you know, another thing is many insurance companies will give a discount if you pay in full instead of monthly installments. And they might also offer discount if you use a property manager or a member of a property management association. 00:28:37:02 - 00:29:00:09 ADAM So those are some other ideas for you, fantastic. So, you know, kind of in closing here, right there, we've gone over quite a bit and hopefully all this has helped you become more knowledgeable on landlord insurance. This is this is meant to be surface information not getting too far into the weeds or else, you know, your eyes glaze over. 00:29:00:17 - 00:29:23:23 ADAM But hopefully this has been helpful to get and get you enough to be dangerous. Right, to 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 steadily are all very experienced and love getting good questions. So when you're working with your agent, ask them questions like, Are there additional coverages I should add on? 00:29:23:23 - 00:29:45:06 ADAM 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. 00:29:46:08 - 00:30:10:03 ADAM Are there upgrades or repairs I can do to this property to reduce my insurance costs? All right. Ask that question. Super important and you never know what you're going to get back. And a really, really good question. This is always, you know, best practice is 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. 00:30:10:03 - 00:30:37:02 ADAM So it's it's very important to 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 Flex. If any of you guys have been investing in those to to really, you know, do some renovation on some older properties and turning them into rentals and maybe even selling them in a short amount of time. 00:30:37:02 - 00:31:00:12 ADAM 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 and real estate investing business. So, you know, get quotes, speak with experts and conduct your own due diligence. That way you go to sleep at night knowing that no matter what happens, you and your business recover. 00:31:01:08 - 00:31:06:24 ADAM So with that, I think we'll turn it over to Q&A, right? 00:31:07:23 - 00:31:30:18 KRISTA Yeah, absolutely. And just to build off of what Adam said there for a moment, if you're in the market for landlord insurance, our partners over it steadily can help you out. So I will go ahead and draft 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. 00:31:30:18 - 00:31:53:04 KRISTA Oh, 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. 00:31:53:04 - 00:32:14:20 ADAM 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 answers. So, Andrew, if you're if you're available to come off and want to take on some of these questions of degree. Sure, sure. Yeah, I figured that'd be a little bit easier than typing everything out and tagging everybody. 00:32:14:20 - 00:32:49:03 ANDREW So let's take a look. Okay. So Susan asked earlier if an umbrella policy will cover the needs. To be honest, I'm not entirely sure which need you'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 5000 up to 1 million, 2 million, 3 million. 00:32:49:03 - 00:33:17:04 ANDREW And there's plenty of other options for access liability. So depending on how many properties you own and how much liability you feel like you're exposed to, you can absolutely purchase additional excess liability coverage. So so, yes, in the event of a lawsuit, the liability would be taken after the underlying limits of the debt. If your landlord policy. There's another option where you can exclude them, you can exclude liability from the landlord insurance policy and then just get a general liability policy. 00:33:17:10 - 00:33:49:18 ANDREW 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 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, maybe you what is needed? 00:33:50:13 - 00:34:19:15 ANDREW 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 you live in. 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. 00:34:20:06 - 00:34:46:00 ANDREW 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. And Stephen said, How can you mandate a tenant purchases and maintain the tenant's policy even if you have it in the lease that the policy cancels, the landlord really doesn't have much legal recourse. 00:34:46:20 - 00:35:13:19 ANDREW I've never seen an eviction court throw out a tenant because they didn't have a tenant insurance part of the lease. Just curious. So Stephen, that that's a great point. When we as insurance agents remind our landlord investor partners to require their tenants to have rental insurance, which 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. 00:35:14:10 - 00:35:48:06 ANDREW So owning the property itself opens you up to a lot of liabilities, whether you have it now or not. And so in those examples that Adam shared, you know, any of those things that 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 brought it down, that you would at least get some payments back instead of having to be out of pocket for all of the costs. 00:35:48:06 - 00:36:08:01 ANDREW Carson asks, Was 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 has been able to pay it. 00:36:09:00 - 00:36:38:18 ANDREW 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 trust? Theresa Saurus Rex Awesome name. 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. 00:36:39:07 - 00:37:01:15 ANDREW So it's not necessarily something that covers damage or something that the landlord policy doesn't cover. It's 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 passed away in one of your properties and their family sued you for it and they sued, they're obviously going to sue for more than $1,000,000 in someone's life. 00:37:02:07 - 00:37:32:01 ANDREW So and you only have $300,000 of liability coverage on your underlying policy, then you pretty much be responsible for the remaining costs out of pocket. But with the umbrella, after those 300,000 limits have 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 and then bar near future? ANDREW That is a fantastic question. So we hear it steadily 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, that'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. ANDREW 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 renovation with builders risk endorsement or a traditional builder's risk policy. ANDREW But if it's any minor renovations such as interior cosmetic work, changing of 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 banner innovations for minor. So those policies have a tendency to be a little bit lighter on the premiums, but very similar to a builder's risk. ANDREW 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 age and all the details, they'll be able to couple you with the policy. Albert asks, Will a copy, a copy of PowerPoint will be sent? Perfect. Oh yeah, you did. And so that's. ANDREW Sorry. Notice Andrew asks my tenant holes all over the walls. They have pictures on that that's 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 it would lead me to believe that if you have vandalism, malicious mischief, that it could possibly, possibly be covered. ANDREW 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 of repair to 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. ANDREW So now you have a zero page claim with no with no no future payouts with loss. But now you have a loss history on your claim. And one of the big things to note of that. Yeah, I was just sorry. I was just going to also jump in here. Right. If we're talking about hang pictures and holes, right. ANDREW If if this is this is different than a that a tenant punched a hole in the wall. Right. If we're talking about stuff at the during the moved 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 moved in. ANDREW And if there's an opportunity there to say, hey, it's their responsibility to do that, otherwise it's going to come out of your security deposit. That's the 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. ANDREW Yes. Excellent point. Okay. Yeah. So absolutely, even if you have a zero pay claim, it could possibly increase your premiums. That's the unfortunate side effects of 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 how they want to that. ADAM I'm sorry. I'm sorry to interrupt. There is one I think that I saw that I that I'll go 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? It's a policy. A landlord really doesn't have much legal recourse. ANDREW I've never seen an eviction court throw out a tenant because they didn't have tenant insurance prior to lease. Just curious. Yeah great question from a from a landlord's perspective and I'll give you information, but it's important to go in and seek advice, obviously, from legal advice and those folks that can advise you the best. But what I have seen is having it be a requirement it 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 renters insurance. ANDREW 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's changes in that policy. I said there there's holes because some insurance companies out there, right. Like even though you're listed as additional insured or additional interest, you might not get notified. ANDREW 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 list. If you don't provide this, that's an important step that could be used later in eviction, but with assets steadily like it could be an advantage to the talking point could be, you know, Mr. Tenant, in order to rent this property, you have to have a an insurance policy that's covering against accidental damage that you might cause. ANDREW 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 steadily who is partner that we know. And if you get a policy through them competitive rates and they will list us as additional insured so it'll meet your requirements. ANDREW Just an idea throwing that out there, but happy to take that offline and we can talk more about that individually. Back to you and your. Absolutely. Thank you, Adam. All right, Albert, as a landlord, can I buy and pay for my tenant rent or liability insurance? So Albert and I mean, what I usually referred 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, says agents cannot pay for the policies, but I haven't necessarily heard anything as far as property owners paying for them. ANDREW 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 asks, 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. ANDREW Every company uses their own calculator, but it usually depends on the square footage, the finishing on the materials, the 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. ANDREW So in certain states, reconstruction costs are just way higher than others. So in Colorado, for example, I've noticed, has a reconstruction cost average of roughly 4 to $500 per square foot from everything that I've been seeing. Whereas here in Texas, I've seen averages of 100, $120 per square foot. So it's going to vary depending on location, what the risk looks like, what kind of disasters have had it in the past, what could possibly be coming up in the future? ANDREW So 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 the imported marble from Italy, you know. So and Vanessa asks, 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 as for why is that? ANDREW And okay, so I think we have time for one more. Andrew And then okay, I think it's important for everybody to know is this we're giving you information. There's going to be follow up. Krista, I can talk a little bit more about that here in a minute, but we hear it steadily, are here to answer all these questions and want to engage with you guys and talk about your individual situation. ANDREW So that's all right. Yes. So, Betty, Jay 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? So in that situation, Betty, what I would highly recommend is finding a company that has the home endorsement program. ANDREW So that would allow for you to list it as a quad plex 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. ANDREW I know we here at Steadily have multiple carriers that offer situations for that, but I would definitely check with your with your agent and your current policy, 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 could be very detrimental for you. ANDREW 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've touched on this before, but it could be considered missing misrepresentation of information on the application. And the company has the right to deny any claims because it is an occupied or not owner as listed. ANDREW So having the right type of policy is very important to protect yourself. It's nice. KRISTA Oh okay. 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. I will go ahead and drop it again just to make sure you have it. That will get you to Steadily. KRISTA 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 will let you choose the next topic of our webinar. KRISTA It'll also ask you a couple of questions about how this went for you, and we will send the 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 you are ready to go and do great joke only share what you comfortable with otherwise. KRISTA Thanks for being here and appreciate it. ADAM 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 and tastic. KRISTA Thank you, everyone. ADAM Thanks, guys. Have a great day.
Source & Guest Links
More Resources and Tips
The Ultimate Landlord Insurance Guide
Landlord insurance, also known as rental property insurance, is a policy that protects property owners who rent out their property.
How Landlords Benefit From Renters Insurance
Renters insurance is a protective tool for renters, but did you know that it can benefit landlords too?
Umbrella Insurance for Landlords: Protecting Yourself from Liability
Protect yourself and your rental property with umbrella insurance, which adds extra coverage to your policy.
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