Landlords face a specific set of challenges, but the good news is, they have plenty of resources at their disposal. We’ve been discussing landlord insurance, which is a key way that landlords can protect their investments. Today, we want to look into what you should see in a great insurance policy and how you can keep your premiums low.
What Makes a Great Landlord Insurance Policy?
We’ve talked about the work that landlord insurance is supposed to do for you. However, when you dive in and start trying to find the policy for you, the options can be a bit disorienting. Here are some features you should definitely watch for:
- As you may know, flood insurance is offered by the government through several insurance agencies. If you live in an area that has a history of flooding, make sure your insurance agency participates in the flooding program. The price you pay for flooding insurance is determined by the government and will fluctuate depending on risky your area is. Keep in mind that this flooding insurance only applies to damage done by the weather. Damage as the result of a burst pipe will be covered in your general policy.
Protection from inflation
- Home repair costs rise all the time, and you don’t want to be stuck with a policy that cannot provide the money you need to keep your dwellings habitable. A good landlord insurance policy will keep up with inflation so you have what you need.
The ability to customize
- Every landlord has a different situation. The policy that works for one landlord will not work for another. For instance, one landlord’s dwelling may come with a pool while another landlord’s dwelling provides tools. Take the time to find a policy that can be adjusted to perfectly suit your needs and give you complete coverage.
Excellent replacement cost coverage
- Do not be tricked by policies that guarantee you “cash value.” It’s a pretty phrase, but it’s based in depreciated costs. For instance, if a decade-old roof gets damaged in a storm, a cash value policy will pay you what the roof cost when it was installed...but only after decreasing that amount for each year of the roof’s age. The best you can hope for is a fraction of the replacement cost, especially after inflation. You need an insurance policy that will cover your replacement costs completely.
Tips for Keeping Your Rates Down
Because landlord insurance costs extra, you need to be smart about choosing a policy that will give you what you need for the right cost. Hopefully, these tips will help you stay on track.
- Understand your situation and only buy what you need. It may feel comforting to buy every form of insurance available, but if you don’t need it, don’t buy it.
- Implement smart safety measures. The safer your dwellings are, the lower your rates will be. Here are some safety measures that can bring your costs down:
- Requiring tenants to be non-smokers
- Updated sprinkler systems
- Locked or gated access
- Inspections for mold
- Requiring tenants to purchase renters insurance
- Updated electrical inspection
- Burglar alarms
- A good report with the Comprehensive Loss Underwriting Exchange (CLUE)
A few extra tips:
Take those tax deductions. As a landlord, you’re running a business. You can deduct your insurance premiums as business expenses. Property damage that isn’t completely covered by your insurance can be deducted as “casualty losses.” Do not forget that mortgage interest, repair fees, and accountant costs are all deductions as well.
Stay on maintenance. When you maintain your property well, you not only avoid headaches, you maintain a clean CLUE report. You also gain the ability to defend yourself against neglect claims from your tenants.