Rental Property Insurance Coverage – Section 1 Coverage

Protecting your stuff is why you purchase insurance. The section I coverage of a rental property insurance policy tells you what will be covered and how.

Rental Property Insurance Coverage – Section I Coverage

Section I – The part of insurance you care about

Every insurance policy has sections. On a rental property insurance policy the there are two sections. Inventively, they are called Section I and Section II. This article breaks down Section I only. Under each section, there are a handful of coverage parts. Insurance doesn’t have to be complicated. So, let’s see if we can break these down into understandable pieces.

Section I – Protects your stuff, you know the stuff you care about. There are typically 4 parts or coverage items provided by section I.

Coverage A – Dwelling – This will be the rental property itself; the main house. PLUS, it will include anything that is attached to the house. So, things like attached porches, decks, car ports, and patios are part of the dwelling. However, if it’s only connected by a wire or a fence, there is no coverage.

Coverage B – Other Structures – This includes any buildings or structures that are not connected to the house. Including, but not limited to things like: detached garages, storage buildings, fences, pools, gazebos, walkways, and driveways.

Coverage C – Personal Property or Contents – This is tricky, because most rental properties don’t come furnished. Also, contents or personal property of tenants are NOT covered. So, for typical investors, this is going to include things such as refrigerators, stoves, washers, dryers and other appliances, but check your policy some of these things may be covered as a part of the house.

Coverage D – Loss of Use – If a rental property suffers a covered loss, and becomes uninhabitable, the insurer will pay the “fair rental value” for the rents that are lost. Meaning that if there is a fire, and your renters move out while things are being fixed, you can still be reimbursed for the rent that you would have otherwise received.

That’s it. Four coverage parts in Section I. Pretty simple. So, you have the house, any other structures, the stuff inside, and the rent you receive. Not complicated at all.

Start your quote online now, or contact with questions about Section I. Our licensed agents can walk you through the process, just call 1-877-784-6787.

Risk Management

Let’s get real for a second. You are investing in real estate. You need to protect the asset, the cash flow, your business. So you buy insurance, but managing the risks you face is more than just buying an insurance policy. There are several types of risks you face. Some are insurable, some are not, but A LOT of headaches can be avoided with some simple risk management concepts. The Risk Management process is pretty simple.

  • Identify Risk
  • Analysis
  • Plan
  • Monitor
  • Rinse and Repeat

Let’s walk through this for a moment from the perspective of a real estate investor. Let’s take a look at three common risks, and how one might manage the risk.


A fire could down the home, destroying the asset and its cash flow. So let’s walk through the process, we know the risk. What would the loss of the home do to your business? If you have a mortgage on the home, you would still be on the hook for the payments, but would be out the cash flow. It would probably be devastating to your business. So your best plan? In most catastrophic scenarios where the financial well-being of your business is at risk, it is best to transfer the risk. Insurance is a risk transferring mechanism. Rather than you taking on that risk, the company does. So by purchasing a dwelling fire policy that protects the asset, you insure the cash flow with business income coverage or the “fair rental value” which pays for the cash flow. Pretty simple. Then monitor, this one is pretty easy, but when it comes to insurance it is important to review. What has the market done? How much is the home insured for? Does that need to be adjusted? Do you have enough liability insurance, have you increased the rent? Remember the company will pay you the rents you lose in the event of a loss, but you need to state what you are collecting in rent. If that has increased you need to increase that coverage. So there is a little work to do, but your insurance agent or broker should be able to help you through the monitoring process.


A tenant poses all kinds of risk. They could damage the home, they could not pay rent, they could sue you and so much more. A lot of risk. For example, say we will focus on the risk that the tenant damages the home. This too can be catastrophic, and require reinvestment that eats into our profits. However, risk transfer is not an option, as damage done by a tenant is not covered by the insurance company. So how do you manage this risk? In this case your best bet is what is known as Risk Avoidance. That is, avoid tenants that will destroy the home, or in other words tenant screenings. There are a number of tenant screening services. We recommend that you use one that will not only provide the online screen, but that will do full background checks. Usually the cost of these is cheap, and if you do it right, you can have the tenant pay for the screening. That extra step may go far in deterring those would-be investment destroyers and non-cash flow payers. It’s a great plan that won’t eat into your profits. From there monitor the situation. Find a good screening company, and if something goes wrong review what happened. Did you ignore a red flag in your haste to get the vacancy filled? Did your screening service miss something important? Analyze, and make a new plan or continue on.


Didn’t we just cover this? Yes, but they pose A LOT of situations that are scary. The risk is that you have to evict, and you get nailed with a lawsuit because you didn’t follow the legal steps. Again, this is catastrophic, but again risk transfer is not an option because wrongful eviction of a tenant is not covered by the insurance company. You might notice that insurance companies don’t like to pay for your lack of information. So how do you manage the risk? This time the answer is Risk Reduction. You can’t really control what a tenant does or how they react. But there are ways you can reduce the risk that you are actually found to be at fault. This one is a no brainer, but too many investors fail to take the proper steps, which include education, education, education OR outsource. If this is something you plan to do on your own, education is the single most important step you can take to ensure you are following all applicable laws. If you can’t or won’t do that, then outsource it. This is one of the things that property managers do, so get a good one that knows the process and has done it (i.e. your brother-in-law, while a good guy, is probably not your best option). The experience or knowledge can help you avoid pitfalls and heartache and reduce the risk you face. That’s the plan; now, let’s hope you never have to do it. How could you further reduce the risk?

Bottom line is that we as investors run into risk all the time. The question is will you have a plan, or fly by the seat of your pants? It doesn’t take long, take a few minutes, sit down, and list those things that could potentially keep you up at night and figure out a plan and how you will react. It may make all the difference in the world when it comes to your sleep habits.

What is an Independent Agent?

An Independent Insurance Agent is someone who represents multiple Insurance companies. This means that they can shop the market to find you the coverage you need at the best price. Year after year after year. Because unlike some insurance agents that represent one insurance company, independent agent represent many.

In the insurance industry there are different kinds of insurance companies, and each company chooses how to distribute their product. Some use captive agents, some sell direct, others use Independent agents, and some choose multiple methods. Many use multiple ways to distribute their insurance products. Let’s see what each of these mean.

Captive agents – These are the ones you are most familiar with. State Farm, Allstate, Farmers, and American Families all use the captive agent model to distribute their insurance products. These agents can be excellent insurance agents, but contractually are only able to sell you one company. So if rates go up, you have to find yourself a new insurance agent.

Direct writers – With the internet there are an increasing number of direct writers. These include companies like Progressive, GEICO, and Esurance. You go online and can purchase your insurance, but again, if rates go up you have to do the shopping.

Independent Insurance agents – These are agents that get contracts with multiple insurance companies and can shop the market to find you the best rate. These agents tend not to have well-known names, but the companies behind them can be very well known. Safeco, Travelers, Metlife, and others like to distribute their products through independent agents.

Then there are those that choose to distribute through multiple channels. Allstate for example, has their captive agents, but also sells direct as they purchased Esurance, and they use the independent channel through a company called Encompass. Farmers sells direct through its agents, but also purchased 21st Century to compete with Esurance and Progressive. Farmers also purchased Foremost and Bristol West to sell through independent agents. Progressive is well known for its direct sells, but also boast that more independent insurance agents sell through Progressive than any other company.   Seems to be a lot of ways to get the same companies, and it is. But if that is the case, then why wouldn’t you let someone do all the shopping of insurance. An Independent agent.

That’s why Gila Insurance Group LLC chooses to be an independent agent. Because in the end, we can provide the best value for our customers. Year after year after year.

Learn more about who we choose to partner with, and about Gila Insurance Group, LLC today. Check out the independent insurance agent difference. Get a quote online from multiple companies that we represent