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 level of coverage desired.
Why be Insured?
A building insurance for landlords is a necessary item that provides protection of 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. The amount of insurance required, based on the appraised value, will be part of the mortgage contract.
In addition to insuring the building and property, the owner will want to insure any personal property in or on the property they own. If you, as the landlord, rent or lease a furnished dwelling, insure the furnishings. Garages and sheds 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 tenant’s personal belongings. A landlord, as a courtesy, 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 own personal belongings. If a landlord rents a furnished dwelling, the renter is not required to 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 homeowners insurance may be extended to cover the renters' property.
If commercial property is owned, buildings insurance for landlords will cover not only the building and property but also the machinery and other industrial equipment. Your insurance company will tell you what is considered “machinery and industrial equipment.” This is important to know as equipment that does not fall under the machinery and industrial category, may qualify under other policy coverage.
It is not only 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.
Colleen Kelley - I have been a freelance writer since 2000. I write, edit and publish newsletters for four non profit organizations and several ...
