What's different about Rental Homes

The issues with rental homes are numerous from an insurance perspective.

1. How old is the rental home?
Most insurance companies will offer the best coverage to newer homes. Some copanies get very difficult once the home is over 35 years of age. Other companies do not like rental homes constructed prior to 1958 or 1950. The condition of the property of older homes is key in getting the insurance company to grant coverage they usually do not offer on the older homes.   Overall, the condition of your property is a major factor.   Location is the other major factor in the cost of your rental home insurance.  

2. Will I get sewer back-up coverage?
Some companies will not offer sewer back-up coverage on rental homes. When shopping for coverage make sure you are being offered the coverage.   If you have more than one rental home you may be able to insure them  under a commercial insurance policy where you may be able to buy flood insurance as well.

3. Will replacement coverage be offered?
In many cases you can't get coverage for replacement cost unless the renatl home is reasonably new or has been fully updated. Pictures and details about updates are important in order to get concessions from linsurance companies. In other words, if the property is in excellent repair many companies will offer replacement cost coverage.  

5. How will the shingles be covered in the case of windstorm?
Your base policy will determine the type of coverage provided. If you have replacement cost on the home you will have replacement cost on the roof. However, most companies require photos and information before they grant the coverage. The insurance provider can and will restrict coverage on the roof to actual cash value if it is in bad repair or near the end of its life expectancy.

4. What level of coverage can you get?
It is possible to get broad form or all risk coverage but again it depends on the age and condition of the property. Fire and extended coverage is the most common coverage being offered. Again, newer homes can be insured for all risk coverage. As a landlord all risk would be the best choice.

5. What if the tenant damages your property?
Some companies will offer coverage for damage from a tenant but these coverages are usually very restrictive and limited.  Often the maximum coverage being provided is a token $1000. Don't confuse vandalism coverage with damage from tenants. Vandalism is a criminal code offence and may be insured under the policy even if a tenant were to do the damage out of hostility toward you. It is important to make sure you rent to reasonable individuals in order to limit possible losses in this respect. Damage deposits are limited by law so your protection is who you rent to.   

When we talk about damage by tenants we are referring to holes in doors and walls, uncleaned carpets, cigarette burns, etc.   If fire is caused by the tenant from smoking, for example, your policy will cover you. 

6. What happens if it takes a while to find new tenants and the property becomes vacant?
The coverage on your home drops substantially if the home is vacant. One must be dilligent in protecting the property from theft, water damage, freezing, and vandalism during a vacancy as coverage will be very restricted on these perils as soon as the home becomes vacant.   If you do not report and make sure the isurance company gives permission for vacancy within 30 days of it becoming vacant you very likely will be uninsured for all losses.  Make sure you report any vacancy situation.    In addition, the premiums can go up dramatically during a vacancy. If the vacancy is due to remodelling one is well advised to get a construction policy for the project as the coverage will be much better.

7. What happens if my tenant turns out to be a drug dealer and establishes a grow-op or sets up a meth lab?
There is simply no coverage for damage resulting from mold or chemical contamination. You must be dilligent in making sure you know your tenant. Regular inspections are important to insure the property is not being altered or used for eligal purposes. This is an exposure that the insurance comapany refuses to assume on your behalf.

8. What happens to the claims free discount on your home isnurance and other rental properties if you have a claim?
Some company's claims free discount is lost on the entire policy while others will only take away the discount on the property where the claim occured. Since it will affect the policy for 3 to five years it can be a substantial amount of money.  When you have a claim make sure you check to see what affect it will have on these discounts and shop around at renewal. 

Commercial Policies should always be considered.

If you have more than one rental home you may be best to insure under a commercial policy. The coverage can be better and the rates can be lower depending on the number of homes and type of coverage being purchased. Expeience and knowledge of renting is given more consideration by the underwriter.  This is especially true if the homes are owned under a holding company. 

The average home insurer offers coverage on rental homes but the coverage varies a lot from company to company. Concessions are often made if the application is submitted with lots of details. Experience and knowledge of property managment from the owners can result in some substantial concessions from the insurance company.

How your application is presented to the insurance company  can make a big difference.   Adding your rental homes to you personal dwelling coverage may not be the best alternative. 

Call me on my cell 306-821-1620. We can help.