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What Type of Insurance Do I Need for Rental Property?

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Rental properties are virtually everywhere nowadays. Whether you’re a real estate investor or someone who’s looking for a place to reside in, rental property is an incredibly viable option regardless of your budget and your goals. But apart from investing in or leasing a rental property, something you should never forget to consider is taking out an insurance plan on rental property. While this may seem like a bothersome additional cost, having an insurance plan is invaluable, and it’s important that you know which type of insurance to avail of.

Photo by Erik Mclean on Unsplash

Why is Insurance Important?

Although owning or leasing a rental property presents you with an opportunity for security, whether financial or otherwise, no one really knows what can possibly happen on any given day, and it’s important that you protect yourself from unexpected events that could deplete your pockets instantly.

Knowing all about insurance is also an important aspect of real estate agents’ jobs, as they can refer clients to reputable insurance providers who will make sure that you’re well-protected.

Taking out an insurance policy will ensure that you will be safe from all the inherent risks that come with owning or renting a property, whether they be acts of nature or other unexpected events that might cause you to incur additional costs. By having an insurance policy, you’ll be able to be covered financially in case these events happen.

While having insurance also entails having additional expenses to pay for every now and then, the minimal cost of premiums is nothing compared to the possible costs you may incur should disaster strike. Having insurance basically means paying for your financial stability.

What Types of Insurance are Available?

When dealing with rental property, there are numerous insurance types you may opt for, depending on whether you’re a landlord or a renter. Here are the insurance types you can avail of and what they provide for you.

Landlord Insurance

As the name implies, landlord insurance is available for landlords who own or put up for lease rental properties. With how widespread renting is today, owning a rental property is a great way to increase your streams of income, but it also comes with responsibilities such as ensuring your tenants’ safety and maintaining the property.

Landlord insurance can help with these responsibilities by providing for protection from property damage and legal liabilities. Property damage insurance deals with answering for repairs necessitated by disasters such as earthquakes and fires, while liability protection ensures that you have finances to cover expenses for injuries sustained by tenants caused by property defects.

A typical landlord insurance also includes coverage for lost rental income, which compensates you in case your property becomes uninhabitable due to unforeseen damage.

Renter’s Insurance

Some landlords may require tenants to get renter’s insurance, because landlords are generally not liable for loss or damage to renters’ personal property. Thus, it may happen that a disaster occurs and the tenant receives no compensation from the landlord unless the tenant himself or herself sustains an injury.

By having renter’s insurance, a tenant does not need to go through the cumbersome process of going after the landlord and trying to prove the landlord’s liability. Just by proving the loss and its cause, a renter can be compensated.

Umbrella Insurance

Umbrella Insurance covers other areas that may not be covered by your ordinary renter’s or landlord’s insurance. This adds an extra layer of protection with regard to other areas, such as providing compensation for particular lawsuits, injuries, and may even include additional financial protection concerning areas already covered by your insurance.

With umbrella insurance, you can basically recover more than you could have in cases where the amount of your claim exceeds the limits of your policy.

Bottom Line

The type of insurance you should opt for primarily depends on whether you’re a landlord or a tenant, and when it comes to rental property, insurance should be a priority. Having insurance will help you protect your assets in the long run and will secure your peace of mind. Plus, availing of an umbrella insurance policy is an option if ever you feel like you need more protection.