Landlord’s Insurance

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What it is and why it is important?

Most rental property owners in British Columbia come across one impending question early on in the stages of their business: What is your most important concern as a landlord?

For most rental property owners, the biggest concern would probably be about finding good tenants for their vacant units. But aside from that, you should be looking into a landlord insurance to protect you and your property.

After all, if a landlord can’t find good tenants to rent their units to and put bad ones in their rental property instead, it can leads to months of lost rent, thousands of dollars in damages and ultimately a lot of stress. The losses can be irreversible and would definitely put a strain in any landlord’s wallet.

Now think of the losses. When it comes to losses due to damages, what would come to mind? These are additions to the already prevailing expenses that a landlord deals with.

In any type of business, there will be occasional bumps in the road that would lead to a loss. Some are big and some would have minimal effect. More important to think about, there are challenges that every owner will face that can directly or even indirectly alter the flow of income or take out a huge chunk of an accumulated budget. Renting your property can be a good source of income, however, it is important that you protect it by making sure that you have a landlord insurance policy specifically designed to cover rental properties in place.

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There are some landlord policy that provides coverage for renting out a portion of the property but they will usually do so if the owner is present 24 hours a day, seven days a week, in order words, only if the owner also occupies a portion of the property. If you rent out the entire property or if it’s a building made up of several individual units such as an apartment, insurers will require a rented property policy. A rental property policy has many coverages that are the same as a standard landlord’s insurance policy but also have coverages specifically designed to cover rental exposures.

What Does Rental Property Insurance Cover?

Rental Property Insurance should cover a number of things that are in line with rental concerns. The basic coverages that an insurance company will offer include the following:

  • Building coverage: There are many different ways to cover a rental property. There are companies that will only ensure a limited number of concerns while others offer full comprehensive coverage. The basis of loss settlement can differ as well, from the depreciated value to guaranteed building replacement. Be sure you have the best coverage possible.
  • Site or Premises liability: A friend of your tenant falls through a rotten piece of decking and sue you for her injuries. Now what? You’d better have premises liability insurance to protect you against just such claims. Even if you are not found to be negligent, your liability insurance will cover your legal expenses.
  • Landlord’s property: This covers property you own in the house you’re renting out, such as a washer and dryer, window coverings, and other amenities. If you rent your home partially to fully furnished, you’ll need to ensure all of the furniture as well. Once again, the policies in place will differ greatly with this type of coverage. You should also check to see if your property is insured to its full replacement cost or only to its depreciated value.

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What About Owning a Condo?

If you own a condo and you are renting it out, the policies which concern your property are quite different.

The basic coverages that an insurance company will offer for a condo include the following:

  • Building improvements:

    • Luxurious granite countertops were installed as well as upgraded hardwood floors. Even though these are considered part of the building, did you know that none of these things are insured by the insurance being used by the corporation that runs the condo building? These are considered building improvements and it is the unit owner’s responsibility to ensure the upgrades, even if the improvements were made by a previous owner. Also, it is wise to check your condo bylaws in British Columbia. Some buildings have made the unit owners responsible for countertops or floors, even though they were part of the original construction.
  • Condo deductible assessments:
    • As a unit owner, if the building suffers a loss, the condo corporation may assess each unit owner a portion of their insurance deductible. In cases where the loss arises from your unit, you could be responsible for the entire deductible. There may also be times when the condo corporation can’t, or chooses not to, put in a claim with their insurance policy, such as when a loss is below their deductible, it’s not covered by their policy, or it affects only your unit. The costs in these situations will come out of your pocket unless you have the right insurance!
  • Condo property damage assessments:
    • Condo property damage assessments occur when the strata corporation does not have sufficient insurance to repair damage to the condo building. If there is a large loss, any shortfall in the building insurance will be assessed proportionately to the individual unit owners. This is a very important optional coverage to consider!
    • Condo liability damage assessments: If a visitor is seriously injured on the common property (slips on the icy sidewalk or the wet floor tiles) and sue the condo, the condo’s insurance will normally respond. If the injured party is awarded an amount higher than the limit of insurance carried by the condo, then assessments will be made against the individual unit owners.

Rental Income Insurance

Being a rental property owner, the main objective really is to have the rent coming in. Now let’s go back to what was mentioned at the beginning of this article when losses were mentioned. What if your property suffers loss or damage covered by your policy, and your tenants have to move out while repairs are being completed? Then the logical thing to do beforehand is to apply for rental income insurance.

This is a very important coverage that all rental property owners should have. The benefits include having coverage for a full year of lost rent if it should take that long to complete any repairs.

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However, there are exclusions and conditions that you need to be aware of such as:

  • The policy usually stipulates that the insurance will pay the “fair rental value”, so if you’ve been charging $2,000 a month, but the going rate in your area is only $1,000 a month, you’ll only receive $1,000 a month.
  • Coverage generally applies only for the reasonable time required to complete insured repairs. So if it takes 6 months to repair, and another 3 months to find qualified tenants, you won’t be paid for the full 9 months, even if you had enough coverage, but only for the 6 months, it took to repair.

With all that being said make sure to carry the most comprehensive policy you can. Owning a rental property is definitely a big investment, and in the event of a loss, you would want to be well protected.

Talk to Bolld Real Estate Management today and get the best recommendations of where you should be getting your landlord’s insurance policy.

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