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Property Management Blog

Important Questions to Ask Your Insurance Agent

Mendell Gosnell - Monday, August 17, 2020
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One of the most critical steps that you must take to ensure the success of your rental property is getting the right property insurance.

As your property management company, we cannot advise you specifically on what insurance policy to purchase. The purpose of this article is simply to make you aware of common insurance facts and important questions to ask your insurance provider because failing to understand your coverage could lead to devastating financial loss in the future.

Does my property have the right insurance for an investment/rental property? 

This is THE key question to ask. Many people do not realize that a normal homeowner’s insurance policy is generally invalid within 30 days after you vacate the property and convert it to a rental property. You should put a different policy in place as soon as possible.

In addition, the best insurance for a rental policy will give you additional coverages, such as loss of rent. The type of insurance for property owners generally falls under the umbrella term “property and casualty insurance.”

What type or types of insurance do I currently have on my rental property? 

You always need building coverage, hazard and fire insurance, and liability insurance. However, there are additional insurances that you can carry, depending on the location of the property, its age, and other extenuating factors. Other insurances to investigate are flood insurance if you are in a flood plain, sewer backup insurance, worker’s compensation, terrorism insurance, and loss of income insurance.

Question your agent on your current insurance and what other policies are available that would be appropriate for your investment and worth the cost.

A big key to obtaining the right insurance is to provide your agent with ALL the facts – age of the property, condition, area problems, special use, etc. It is very important to be specific on what “type” of investment property you have (for example, horse property, condominium, single-family, apartment etc.). Most landlord insurances are for 1-4 units; larger unites have a different basis for insurance policies.

Are the outbuildings on my rental property covered? 

Most policies generally do not include additional structures, unless specified. This is another reason why you need to disclose all the information to your insurance agent and obtain quotes.

Is loss of rent covered? 

Covering rental loss under the right circumstance (such as a building fire), is one of the pressing reasons for obtaining a good landlord/rental policy. There is no coverage for tenants giving a standard notice to quit and vacating the premises. However, it may cover vandalism during an eviction or vacancy – but you need to ask. Have your agent discuss in detail the paragraphs in your insurance paperwork which pertain to vacancies / income loss and your actual coverage.

Are disasters such as fire, tornado, hurricane, tsunami, flood, and more covered? 

Normally, most natural disasters are not covered. However, the insurance company may make a determination that many damages are covered. For example, although a flood is not covered, there may be coverage for water damage. Also, a policy normally covers damage from a house fire as long as the property owner has not shown neglect which caused the fire. The insurance company will have a list of criteria for what is or is not covered for extreme conditions under the existing policy. Again, find out the facts and ask questions.

How can I reduce the cost of my landlord policy? 

Landlord insurance is more expensive than a homeowner policy, primarily because the property owner does not have any control over a tenant’s actions, implying additional risk.

In spite of the higher cost, landlord insurance can be made more affordable through discounts for security alarms, especially monitored ones, burglar alarms, deadbolt locks, and fire extinguishers. Ask your agent for recommendations on cost-saving items you can do. Remember, landlord insurance IS worth the cost. Sometimes increasing your deductible can significantly lower your monthly premium.

It is of utmost importance, and it’s your responsibility to consult your insurance provider regarding your coverage. It is also part of your contract with us that you provide our company with proof of insurance.

There are many insurance companies and plans available, and it pays to compare coverage. If your agent cannot spare you the time to answer your questions, seriously think about shopping for another agent and/or company. Review your policies at least once a year, require that your agent provide you with the facts, and take out the best possible policy for your specific investment property to protect your investment.

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