A Brief Overview of Building Insurance for Landlords
Insurance is one thing that seems like such a waste to have, but everyone is happy to be insured when it is needed.
Insurance is the promise of reimbursement in the event of loss due to an unforeseen circumstance. Insurance is a form of risk management where the risk is transferred from the owner to the insurance company in exchange for the prepayment for a policy of protection paid by the individual consumer or business. The insurance rate is the factor used to determine the amount of the premium, or prepayment value, based on the desired level of coverage.
Why be Insured?
Building insurance for landlords is a necessary item that protects the property in the event of damage, loss, or liability purposes. Building insurance for landlords is protection in the event of damage or loss from fire or natural disasters, loss of income if the rental property is unusable due to damage or loss, or if litigation occurs due to a wrongful eviction. The building insurance for landlords should cover the building, as well as the property.
If there is a mortgage on the property, the lender will require the owner to have property insurance to protect against losses. Before a mortgage is approved, the property being mortgaged will undergo a real estate appraisal by the lender to determine the value. Based on the appraised value, the amount of insurance required will be part of the mortgage contract.
In addition to ensuring the building and property, the owner will want to ensure any personal property in or on the property they own. If you, as the landlord, rent or lease a furnished dwelling, ensure the furnishings. Garages and sheds are not attached to the house, and their contents are not typically covered under the homeowner’s policy. They require a separate policy. Do not overlook a garage or shed, especially if they contain tools, lawn care equipment, or used as storage for other things.
What the Landlord’s Insurance Does Not Cover
Building insurance for landlords does not cover the tenant’s personal belongings. As a courtesy, a landlord might provide a small amount of personal property insurance for a renter, but that would be separate from the homeowner’s policy. It is typically up to renters to secure and maintain “renter’s insurance” for their personal belongings. If a landlord rents a furnished dwelling, the renter must not insure anything that the renter does not own. However, in some states, if the owner has fire insurance and the renter does not, and the tenant’s personal property is damaged or destroyed by fire, the owner’s homeowner’s insurance may be extended to cover the renters’ property.
If commercial property is owned, buildings insurance for landlords will cover the building and property and the machinery and other industrial equipment. Your insurance company will tell you what is considered “machinery and industrial equipment.” It is important to know as equipment that does not fall under the machinery and industrial category may qualify under other policy coverage.
It is important to secure and maintain insurance; it is also advantageous to make sure the level of insurance keeps pace with the value of the property. It is wise to re-evaluate every few years and take inventory of the possessions and equipment obtained in that time frame and determine if the coverage you currently have is enough. Make sure your property and buildings are always insured for the current value.