The Basics of Insuring Your Rental Property with Guest, Curt Bulloch

This article is transcribed from Episode 24 of The Accidental Landlord. Listen to the full episode, here.

WELCOME TO THE PODCAST, CURT! 

Thanks for having me! I appreciate it. 

I’m an independent insurance broker and what that means is that we take a consultant approach, and we look at the risks of having a rental. We begin by looking up the address of your property and we compare different multiple companies to see which company is the best fit. So, rather than buying a policy that focuses on price, you want to invest in coverage and get the best coverage you can find for your rental property to protect your cash flow.

We have been doing this for over fifteen years. We are licensed in California, Nevada,
and Arizona.

IS NOT UNCOMMON TO BUMP INTO A NEW LANDLORD THAT DOES NOT HAVE A POLICY IN PLACE, THEY THINK THAT SOMETIMES THE HOMEOWNERS POLICY IS GOOD ENOUGH. 

A landlord policy is referring to a single-family home or a duplex, triplex, or fourplex.
This policy includes a number of different things such as fire, liability, and loss of
rental income. So, as a landlord, you want to have the best coverage. For example, if
you are using a property management company, you want also to protect that
relationship and protect you against tenants motivated lawsuits.

WHAT’S THE BIGGEST DIFFERENCE BETWEEN A HOMEOWNER POLICY AND THE POLICY YOU JUST MENTIONED?

With the homeowner policy, you actually live in the house. You will have coverage in
case the house burns down. This is a policy that covers a dwelling amount, and then
you will have coverage for personal property. Now, if you convert that house into a
rental property, they take away the personal property unless you left a couple
of thousand dollars’ worth. However, what’s most important is that you have enough
coverage in case the house burns down so you want to have extended replacement
cost coverage for each floor, and then you want to have a liability of at least $500,000
if not a million. And if you look at the liability, you want to make sure it covers a
variety of categories such as personal injury (which can be wrongful eviction,
habitability claims, fair housing, and discrimination claims), also you should have
coverage on accidental injuries. For example, if somebody trips and falls, or gets
injured on the property, this policy will protect you against a lawsuit.
The third coverage you want to make to look at is the loss of rental income also
known as fair rental value. If you have a house and you rent it for $3,000 a month, a
good rule of thumb is to have 18 months worth of loss of rental income. So, that
means that if you have a rental loss, you still have some income coming in.

A LOT OF THE TIME THE PROBLEM IS CAUSED BY THE PEOPLE THAT LIVE ABOVE THE TENANT, AND INEVITABLY THE CLIENT WANTS THE PERSON WHO CAUSED THE PROBLEM TO TAKE CARE OF THE PROBLEM. HOW DOES THE INSURANCE HANDLE THIS?

In a condo policy, first, you must figure out how much the range covers on the inside.
Most of them cover the outside of the property. On the inside, however, they may
cover just the walls. Also, you want to make sure you have water damage coverage.

One of the biggest complaints about condos is that they share a wall and sometimes
they share plumbing systems. Accidents happen, and sometimes a unit is flooded
because of the neighbor.

SO, LET’S SAY THERE’S A BURST PIPE IN THE UNIT ABOVE AND DESTROYS OUR RENTAL UNIT. IS IT OUR INSURANCE POLICY THAT TAKES CARE OF THE PROBLEM?

You can make the claim on your own policy, and then your carrier does what is
called the “subjugation claim” against the unit that caused the damage. Or, if you can
get the insurance’s company name from the unit that caused the damage you can also
claim directly.

Click here to listen to the full episode.