5 Common Mistakes When Purchasing Landlord Insurance

Landlords play a crucial role in the housing market by providing rental properties to tenants. However, being a…

Landlords play a crucial role in the housing market by providing rental properties to tenants. However, being a landlord comes with various responsibilities, such as securing the right insurance coverage for your investment. Many rental property owners make mistakes when purchasing landlord insurance, causing costly consequences. As a professional property management company, 3 Options Realty can help you maneuver the coverage process to maximize profits without violating local, state, and federal laws. Here are five common mistakes to avoid when buying landlord insurance to protect your property and investments.

Not Updating Your Home Insurance Policy

The leading mistake landlords make is assuming that their standard homeowners’ insurance policy will cover their rental property adequately. This assumption can be a costly oversight, as homeowners’ insurance protects owner-occupied properties, not rental properties. If you have homeowners’ insurance, our property managers can help you update your insurance policy to a landlord-specific one, preventing financial losses during damage, liability claims, or rental-related issues.

Not Getting Adequate Loss of Rent Coverage

Loss of rent coverage is an essential aspect of landlord insurance that many property owners overlook. This coverage protects your income if your rental property becomes uninhabitable because of covered scenarios like fire or natural disasters. With adequate loss of rent coverage, you may cover mortgage payments and other expenses during property repairs. Ensure your insurance policy includes sufficient loss of rent coverage to protect your rental income during unplanned disruptions.

Not Covering the Full Replacement Cost of the Rental Property

Another familiar mistake landlords make is under insuring their rental properties by not covering the total replacement cost. While this might save on premiums, opting for actual cash value (ACV) coverage instead of replacement cost coverage can lower your compensation to rebuild or replace damages. Investing in replacement cost coverage gives you peace of mind, knowing you can fully recover the value of your rental property in case of a covered loss.

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Not Having Enough Liability Coverage

Liability claims can arise from various incidents on your rental property, including accidents, injuries, or damage caused by negligence. Many landlords need more liability coverage, assuming a standard policy protects them. However, legal expenses and settlements in liability cases can quickly exceed policy limits. We recommend hiring a property management company to ensure tailored liability coverage that addresses the specific risks associated with rental properties.

Not Covering Your Personal Property

While your primary focus is insuring the rental property, remember to consider your personal property within the rental unit. Landlord insurance usually covers structural damage but may not extend to your belongings like appliances, furnishings, or equipment you provide for your tenants. Failing to include coverage for personal property can cause significant out-of-pocket expenses if your items are damaged or stolen.

If you are a rental property owner and want the right landlord insurance, contact us at 3 Options Realty to protect your investment and financial well-being. Our property managers work with you to avoid these common mistakes. By taking this proactive approach, you can minimize potential risks and enjoy peace of mind as a responsible landlord.