About Landlord Insurance
The underwriting concerning Landlord Insurance (LI) is similar to Homeowner's Insurance with one main exception. It excludes the coverage of personal property. It covers structure, liability, and medical (non-resident). Additional clauses can be added to the LI to cover Landlord property such as a washing machine or stove. Each insurance company's 'add on' clauses will vary.
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Structure:
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Basic damages (aka perils) such as fire, lightning and wind are covered with most companies. However, often the list of non-covered situations will far outweigh covered situations. Be sure to review those carefully. Most of the non-covered perils can be added back to the policy through 'add on' clauses. For example, a few of the non-covered perils are mold, termites, war or nuclear attack. In the United States the cost of damages incurred by major flood, hurricanes, tornadoes or earthquake are shared by insurance companies and the federal government.
Liability:
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In the event the landlord is sued for any reason pertaining to the contractually covered address, the insurance company will cover the legal expenses; and if found at fault, the liability will pay up to the policy limit.
An example might be a visitor may slip and fall while on the property. The medical coverage (usually small) would kick in and pay the medical bills; but if the person decided to sue, the liability would kick in and cover the lawsuit. -
Medical:
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A small portion of funds are set aside for the medical costs for non-resident or non-policyholder injuries. This amount is usually between $1,000 to $10,000. This is not associated with health insurance and should not be encouraged to be used as such. Many insurance companies consider this coverage a 'band-aid,' which is supposed to discourage a lawsuit.
Deductible:
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A deductible is the amount the policyholder is willing to pay for damages incurred. With most companies, the higher the deductible, the lower the cost of the policy. However, be sure to do the math because sometimes the high deductible can be deterimental. Most LI deductibles range from between $100 to $5000. Although in some high-risk areas such as coastal properties, the deductibles could be as high as $10,000 or more.
Renters/Tenants:
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The policy will never cover the personal property of the renter/tenant or anyone who resides on the property. This includes a guest that the renter/tenant may be entertaining for a period of time. If the structure causes damage to the renter/tenant's belongings, they are still not covered. The renter/tenant should therefore be encouraged to get tenant insurance, which covers their personal property, liability and medical. Pets and the liability incurred by them are not covered by LI, therefore the renter/tenant should be made aware of this in writing at the time of signing. This will protect the landlord from a lawsuit by the tenant/renter.
Specialty Coverages:
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The items of concern to a landlord that can be added to a policy will vary from company to company. But here are a few ideas to consider adding if they are not already part of the policy:
* Theft of Landlord property (aka washing machine)
* Malicious Damages or Riots
* Escape of Water or Oil (local bodies of water or an oil refinery)
* Subsidence (sink hole coverage)
* Tenant Default
* Employee Liability Coverage
* Terrorism
* Non-standard Construction
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