You save up your pennies, buy a home, and live in it for a few years. After some time has gone by, you decide to purchase a bigger home. Rather than selling the home that you have been living in, you choose to rent it out to a tenant after you move into your new place. You find a great tenant, get them to sign a lease, and you’re all set, right? Well, not quite. When you live in your home, you are required by law to maintain a homeowners’ insurance policy. If, at some point, you choose to rent that home out to a tenant, you need to change your insurance policy. Instead of homeowners’ insurance, now you need a landlord insurance policy.
You may think that there isn’t really a difference and that you don’t need to notify your insurance company. That would be a big mistake. If your home is covered by a homeowners’ policy while you are renting out the home to a tenant, you had better hope that you don’t need to make a claim. That’s because if you make a claim on your homeowners’ policy, the insurance company can – and will – deny it.
A landlord policy has certain clauses that you should be aware of and consider when you are converting your policy. Read on to learn more about these important clauses.
Dwelling coverage with guaranteed replacement cost: The most basic form of home insurance is dwelling coverage. If you have a mortgage on your home, your lender will require you to carry dwelling coverage. Dwelling coverage protects the structure itself, including gas systems, plumbing, internal fixtures, cables, and the like. Guaranteed replacement cost means that the insurance will reimburse you for the full amount that is required to replace or rebuild the property, not just the original value of the property.
Flood insurance: Most insurance policies cover water damage that is caused by a broken pipe or leaky water heater. However, most basic policies do not cover water damage caused by flooding or natural disasters. You must add an additional flood insurance policy in order to be protected from this type of damage. Flood insurance rates are regulated by the National Flood Insurance Program, so the rates are consistent from one insurer to the next.
Personal property: If you are renting a furnished property, you need to have personal property coverage to protect furniture, carpeting, appliances, light fixtures, etc. Even if you do not provide furniture, you may wish to elect personal property coverage in order to cover built-in fixtures like carpets and light fixtures.
Acts of nature: A basic insurance policy does not cover acts of nature, such as tornados, earthquakes, and hurricanes. In order to be protected from an act of nature, you must elect specific coverage for it. The coverage that you need depends in part on the region where your rental property is located; for example, residents of the Midwest should carry tornado coverage, and residents of the Gulf coast should carry hurricane coverage.
Loss of income coverage: Loss of income coverage protects the landlord from lost income in the event that the property is uninhabitable due to a disaster or repairs. This typically does not cover lost income due to an eviction.
If you are new to being a landlord and could use some help from an expert, get in touch with McMath Realty. We provide property management services in Phoenix and all of Maricopa County of Arizona and take care of all the details of being a landlord. Call McMath Realty to learn more today https://mcmathrealty.com//contact.php.