No matter what type of rental property you have, even if it is owner-occupied, you would do well to protect your investment with Landlord insurance. This type of insurance, designed specifically for landlords, is not the same thing as property owners insurance. In fact, most property owners insurance policies dont cover owner-occupied rentals.
A Landlord insurance policy covers your financial losses in multiple ways:
- The building
- Furnishings and appliances damaged by the tenant
- Damages due to flooding and fire
- Medical liability claims should the tenants or their guests get injured
- Legal fees due to tenant litigation
- Losses due to theft and vandalism
- Damages to other structures on the property, such as sheds, garages, and decks
Some policies have more comprehensive coverage that helps you replace your rental income in the event the tenants must vacate the premises. Extended coverage to compensate for loss of your rental income means that not only will you continue to get the monthly rental income, but also monies required to repair any damages.
It's also smart to look for a policy that offers coverage for loss of income in the event you have to evict the tenants or if the tenants move out without paying the rent. Getting comprehensive coverage becomes more critical if your rental income is your sole source of income.
While it is true that most rental income adequately covers routine costs associated with renting the property, its also true that the same income rarely covers the cost of unexpected expenses, whether they are due to natural disasters, theft, vandalism, medical liability, or unreliable tenants. For example, some landlords fail to consider the liability issues they face in the event their tenants are engaged in illegal activities on their property, such as growing cannabis. This is especially problematic for absentee landlords who live long distances from their rental properties and rarely get the opportunity to inspect the house or property.
For your own peace of mind and to protect yourself from financial loss, consider getting the specific insurance you need to protect your investment and your income flow.