Insurance provides protection against liability and property damage. It also provides peace of mind.
Colorado rental property owners need to make sure they’re fully insured. If you are renting out a home you once lived in yourself, you’ll need to make sure you convert your homeowner insurance policy to a landlord insurance policy.
Renter’s insurance is just as important. Make it a requirement in your lease agreement so you know that everyone is covered in the event of a catastrophe or a loss.
Landlord Insurance and Rental Property Coverage
The main difference between your landlord insurance policy and the homeowner’s insurance policy you have on the home you live in is that your landlord policy covers the structure of the home and the costs to repair and replace it. However, it doesn’t cover any personal belongings that aren’t yours. When you live in a home, your insurance covers the structure and all your belongings. But, with a landlord policy, your home is covered, but not the tenant’s personal items.
Make sure your policy covers the complete repair and replacement costs that may be needed for your investment. If you bought the property 10 years ago, the cost to rebuild now may be far higher than the cost from a decade ago. You want to know your policy covers what you’ll need now and in the future.
Landlord Insurance Protects Against Liability
A good landlord insurance policy will also have adequate liability coverage.
This is important because anything can happen when tenants are living on your property. Talk to your insurance agent about the required or recommended liability limits. If something happens and you’re sued, you want to be protected.
Look for Loss of Rent Coverage
It’s important to cover yourself in case you have to move your tenant out of the property. Suppose there’s a devastating winter storm that causes your roof to collapse or the heating dies during the coldest week of winter and there’s a delay in getting the new system installed. Your tenants will not be able to stay in the home, which means you may have to put them in a hotel. If they can’t live in the property for an extended time, you’ll lose a lot of rental income in addition to paying out of pocket for costs like hotel bills.
If your landlord policy doesn’t already include loss of rent coverage, consider adding it. Don’t cut corners when it comes to insuring your property and your interests. You want full coverage so there’s no question about how you’ll recover from disaster.
An important thing to remember is that insurance premiums are tax-deductible.
Umbrella Policy
We highly recommend to our owners that they also have an umbrella policy. An umbrella policy is liability insurance that is in excess of other policies. This can cover a major catastrophe at a rental property, or even cover your personal house or auto insurance. The cost for a one million dollar policy is usually around $200 to $300 per year.
Renters Insurance Protects New and Existing Tenants
Renters insurance is essentially a product that serves your tenants. When you own a Colorado rental property, everything that belongs to you is covered by your own insurance policy. However, the personal property and belongings of your resident are not covered by your landlord insurance.
Tenants need their own policy, and this is why we require it. We want our residents to protect their expensive electronics and treasured possessions.
Tenants are usually surprised to find how inexpensive a renter’s insurance policy can be. For basic coverage, the cost is rarely more than $15 per month. If you encounter a tenant who pushes back against a renter’s insurance requirement, compare it to the insurance they pay on their smartphone or their car. It’s necessary and it’s worth it.
Without renters insurance, the tenant is left uncovered if there’s an emergency or a catastrophe.
We would be happy to analyze your specific insurance needs and make some referrals if you don’t already have a good insurance agent. If you have questions about this topic or anything pertaining to the management and protection of your property, please contact us at Laurel Property Services, Inc.
