Insurance for Rental Properties in Maryland (MD)
What Type of Insurance Do You Need on a Rental Property
The insurance you need on a rental property is different than what you need on a home you live in. While insurance companies are eager to provide coverage for owner occupied homes many are less interested in providing landlord coverage. Some will only issue new landlord coverage if you also have auto or other coverage with them. This can be a huge problem if you are going to be living overseas and have no U.S. insurance in place when you need to obtain a landlord policy. Therefore, it is very important to have a landlord policy in place before you leave if moving out of the country.
The main differences between an owner occupied policy and a landlord policy is the personal property (furniture, clothes, etc.) coverage and the liability coverage.
If you are not living at the property, your furniture, clothing, computer, etc. is no longer covered so you need to be sure you have coverage of these items through a different policy. The landlord policy still needs some coverage for personal property like the washer, dryer, stove, refrigerator, etc., but it will be a much lower amount than when all your belongings were covered by the policy on this home.
The Importance of Liability Coverage
While your personal property coverage goes down in a landlord policy, you will need more liability coverage. Liability coverage will protect you if someone gets hurt at the property. I recommend at least one million dollars of protection. Depending on your personal situation you may need even more coverage. You should discuss this with an insurance expert to make sure you have both enough coverage and the right type of coverage. Extra coverage is not expensive. I also carry, and strongly recommend, what is called an Umbrella Policy. This will give added protection “above” both your property and auto coverage. There are also many optional coverages like sewage backup that you need to consider adding to the base policy.
Your landlord package should come with lost rent protection. This will give you money to make your mortgage payment if the property is damaged and cannot be rented. It can take several months to just come to a settlement with the insurance company after a loss before work can even begin. Then you may need plans and permits. Then once the property is restored you still have to find a new tenant. A good policy will give twelve months protection.
Your Insurance History
Insurance companies keep a database on both you and your property. It’s like a credit report. If you make several claims even small ones, not only may they cancel your policy but other insurance companies may refuse to issue you a policy after they review your history. Therefore, since it doesn’t pay to make small claims, be sure your policy’s deductible is at least $1,000 per claim. This will also reduce the overall cost of the policy.
When you change your policy from an owner occupied to Landlord policy it is a good idea to review with your insurance professional all facets of your coverage including the total dollar amount of coverage as reconstruction costs go up each year.
Insurance is something you pay for but hope to never use. If you need it however it’s only useful if you have the right coverage. Contact the property management professionals at RE/MAX Premiere Selections to learn more.
