Gila Insurance Group has put together a landlord insurance checklist of things you should discuss with your insurance agent. While it’s nice to have the list, the question is why are these so important? Here we will break this down, and explain piece by piece why you need to have these conversations.
| Investment Property | ______ |
| Proper Property Valuation | ______ |
| The Form – DP3- What’s Covered | ______ |
| Loss Settlement Option for Home | ______ |
| Deductible | ______ |
| Water Backup of Sewer or Drains Coverage | ______ |
| Earthquake | ______ |
| Flood | ______ |
| Ordinance and Law/Building Code Upgrade Coverage | ______ |
Proper Property Valuation – Did you know that there are penalties for under-insuring your investment property? There are, and if you have under-insured your home you could be getting a lower payout if you have a claim. On the other hand, over insuring your home costs you money that you don’t need to spend. So how do you get it right? There are cost estimator tools, you can speak with a contractor, appraisals sometimes make sense, but mostly they focus on the market value. What we are looking for here is the cost to rebuild the home. That means we take out the value of the land, and focus on the cost to rebuild the home.
The Form – We have spoken about this at great lengths, and have even put together a form comparison chart, but when it comes to landlord insurance policies, these things matter, and investors tend to try to save money anywhere they can to bolster revenue. Don’t mess up your policy by not getting the “special form.”
Loss Settlement – We talked about valuation and replacement cost already, but there is a second piece to this puzzle. If you don’t have the home insured at replacement cost you could be in for a big surprise if you have a claim. Look the bottom-line on a landlord insurance policy is that if there is a claim you want things replaced, right? So you want to purchase replacement cost. In some cases, that might not be available, so make sure you get a stated value or full repair cost option on your policy, but ensure you understand what is being covered.
Deductible – If you want to save money raise your deductible. How high? How much cash do you normally keep on hand? The deductible is the part of the claim you are responsible for paying. It’s the part you pay first. The question is, if you are handy and unlikely to file a claim, then why have a really low deductible?
Water back up of sewers and drains – water backs up in toilets, showers, and sinks. It happens. And when it happens the damage can be great. However, in most situations the damage caused by the backup of sewers and drains isn’t covered, but it can be added. Your tenants aren’t you, and are likely to not treat the house the same way you would, so this becomes a very important coverage for landlords.
Earthquake – This is always an excluded coverage, but it can be purchased. Even in California. It can be expensive, but it worth discussing so that you can make an informed decision.
Flood – Again, always excluded, but can be purchased. The truth is that every house, investment property or otherwise, is in a flood zone, some are just in a “high risk” zone. That said, MANY floods that cause damage every year are not in a “high risk” zone. Ask! It might be more affordable than you think.
Ordinance and Law – Look our politicians do crazy stuff. I have even seen green, rather than golden arches. Crazy! So what does ordinance and law or building code upgrade coverage do? If you have a loss at one of your investment properties, and the municipality requires you to make some upgrades due to an ordinance or law that has been passed in the area, this coverage will pay for the increased cost of to repair or replace the damage/home that occur in order to comply with the ordinance or law.
To get a quote on your landlord insurance property start your quote online, and let us shop for you.
LANDLORD FURNISHINGS
A landlord’s insurance policy covers the home and can include insurance for the landlord’s furnishings. This isn’t the renter’s stuff, that needs to be covered under a renters policy, this is your stuff. Coverage for the landlord’s furnishings is important, and should not be overlooked. Why, because even if you aren’t furnishing the home, the value of what you probably will furnish can be significant. Consider this; even if you do not furnish the home there may be a refrigerator, a stove, a microwave, maybe even a washer and dryer. If the microwave is built in to the cabinets then it would be considered part of the building, as would the dishwasher, but those other big ticket items are exactly that, even with those President’s Day Sales Prices. Even on the cheap you are looking at $2,000-$3,000 to replace those items. Maybe that isn’t a big deal, however, given the fact that you will already have a deductible you don’t want to compound your out-of-pocket costs with replacing landlords furnishing. Coverage is relatively cheap, and is worth considering.
Other things to consider, landlord’s furnishings are typically covered for “broad” form coverage not “special” form coverage without being changed. This means your stuff is covered for less than what the home would typically be covered for. If this bother’s you can often change the policy to cover your stuff under a “special” form.
If you are furnishing more than just the basic appliances, it is important to note that theft of landlord’s furnishings will not be covered, so if you are going to rent the home out fully furnished you will want to use other risk management techniques to protect your stuff, whether that be through a large security deposit or in some other way, and never furnish with something you can’t afford to replace.