Renting Out Your Building? Here Are Some Insurance Questions To Consider

When you’re renting out a property (or properties) you should consider several things at once, and insurance is an important factor. While many landlords are under the assumption that the basic landlord’s insurance is enough to cover all potential risks, this may not be the whole truth. From damages to the property to income losses due to rental payment failures and other legal issues, the landlord should talk to his insurer regarding the types of insurance coverages that s/he can avail for complete protection.

During the COVID-19 pandemic, many landlords suffered a massive loss of income due to rent payment failures, both in residential and commercial buildings. According to a report by The Wall Street Journal, nearly one-third of the US population failed to pay their April rent due to financial instability, increased unemployment, and other social and economic factors. And among the 8 million landlords in the US, nearly 58% revealed to CNBC that they don’t have any access to emergency credit lines to help them overcome the crisis.

Although the US Department of Housing and Urban Development extended their housing loan forgiveness period for FHA-insured single-family mortgaged homeowners until August (CNN report), many small-scale landlords suffered owing to lack of information and lack of preparation. They were against forced evictions, of course, but the situation made them income-less too.

It’s high time for landlords to explore the benefits that landlord insurance covers, including the rent guarantee insurance offer.

Let’s know more to help you choose the best options for your on-rent property.

What is a rent guarantee insurance?

In the simplest terms, the rent guarantee insurance covers the landlord in situations, when the tenant fails to pay the rent. It may also apply in case of legal issues against any damage to the property or injunctions if the tenant violates the terms and conditions on their rental agreement. This insurance cover is extremely important for landlords, who have multiple properties rented out in different regions. Besides covering for income losses due to rent payment failure, it also covers damages to personal property including, but not limited to, furniture, appliances, and tools provided by the landlords to their tenants for use.

How to apply for rent guarantee claims?

If you want to claim your landlord’s insurance, you should keep the following things in mind:

  • A signed tenant agreement is necessary to place your claim along with proofs of your tenant’s employment
  • You should get one month’s rent in advance and a dilapidation deposit before the tenant moves in
  • A proper record of the rents paid and the ones that are due should be maintained
  • The tenant identification along with a photograph should be kept with other records
  • The tenant reference should be verified by a licensed and professional agency

Is the renters’ insurance the same as the unoccupied building insurance?

No! They are different. The unoccupied building insurance refers to the coverage that protects any residential or commercial building against damages, thefts, or burglaries for the void period. When the tenant moves in, you can amend your existing cover to the basic landlord insurance accordingly.

How can a landlord be protected against legal suits?

If the tenant files a compensation claim against a landlord for any injuries due to his negligence or damage to personal property, the landlord liability insurance could cover the costs for legal defense along with judgment or settlement costs, if any. Although most of the liabilities are supposed to be covered by liability insurance, an optional personal injury liability can cover the landlord against defamation lawsuits and issues like an invasion of privacy. However, it should be noted here that racial discrimination and wrongful evictions may not be covered under these policies.

What insurance covers property renovations?

Many landlords have faced this problem when their landlord insurance or property insurance failed to cover damages caused by renovation and reconstruction works. For that, you need additional cover, commonly known as the dwelling under renovation coverage. While the construction material coverage aims to recoup losses by damage to the materials on your property during the renovation process, foundation collapse coverage protects the homeowner against losses related to basement collapse due to increased hydrostatic pressure or similar issues. It’s best to consult your insurer once to know what type of insurance coverage is available for renovations on a rented property.

You can see that there is a range of options to consider in insurance coverage while renting out your property. You should discuss with your insurer and talk to him/her about the potential threats that should be covered in your landlord’s policy and what additional coverage they would recommend for maximum protection. You must also do your homework and see the options available according to your specific requirements. Make sure you buy the best combination of products to meet your needs at all times.