Carlsbad, CA · Member since 2010 · 1k+ posts · 1k+ votes
Hello all,
I am trying to find out how much and what kind of insurance you guys get on your rental properties? Sorry, if its a rather silly question, but I am a newbie investor trying to understand as much as I possibly can about each aspect of investing.
The answer to that depends on the kind of coverages you want and what type of property you have. Certainly, general liability is an important one and you want at least 1M in coverage on that front. You need to determine what the replacement cost of your structure is as well. In the event of a total loss, this will pay to rebuild a similar structure in its place. You also want to look into a loss of rents provision as well to cover income you would have received where your property in service. These are all front end coverages that will protect you from incidents that occur on your rental property.
Just as importantly, you also want to look into coverages that will protect you on the back end as well. That is, if you do something (car accident) and get sued, you are protected there as well. A renter's or homeowner's policy can provide back end liability coverage for you but you may want to look into an umbrella policy that you can put your assets under as well.
The answer to that depends on the kind of coverages you want and what type of property you have. Certainly, general liability is an important one and you want at least 1M in coverage on that front. You need to determine what the replacement cost of your structure is as well. In the event of a total loss, this will pay to rebuild a similar structure in its place. You also want to look into a loss of rents provision as well to cover income you would have received where your property in service. These are all front end coverages that will protect you from incidents that occur on your rental property.
Just as importantly, you also want to look into coverages that will protect you on the back end as well. That is, if you do something (car accident) and get sued, you are protected there as well. A renter's or homeowner's policy can provide back end liability coverage for you but you may want to look into an umbrella policy that you can put your assets under as well.
Thanks Brian, that's exactly what I was hoping to find out. I just wanted to have some info on the insurance before I spoke with an insurance agent. That helps a lot.
Sorry for the late post but the question about amount and type of insurance just came up. My ex is renting out our old house and was curious about the coverage. How is the replacement value determined? I would think not by comps. Her agent is aware my ex is renting the house. The policy has a loss of rent clause. it also has a clause for personal property ($25K but not sure what that is for as she doesn't have anything in there except waterheater, stove/oven, HVAC), Liability ($300K), and Medical ($5K per person, $25K per accident). The policy is charging for a "Additional Structures". There is a garage built after the house but under the same roof (good professional add on). Does that make sense?
Another question, the balance on the mortgage is only about $40K. With a replacement type of insurance if the house burns (insured for $174K) is a total loss and she elects not to rebuild does the insurance pay off the mortgage and she gets the balance of the insurance proceeds?
I am in the process of getting insurance quotes for my first rental property..and this is what State Farm came back with..
Quote Results Limit Premium
Coverages
Dwelling (Coverage A) 100,000 882.00
Dwelling Extra Replacement Cost Excluded
Dwelling Extension 10,000
Personal Property (Coverage B) 5,000
Business Liability (Coverage L) each occurrence 1,000,000 35.00
Business Liability (Coverage L) annual aggregate 2,000,000
Premises Medical Payments (Coverage M) each person 5,000 4.00
Loss of Rents (Actual Loss Sustained)
Deductibles
Policy deductible 1% 1,000
Charges / Credits
Home alert (44.00)
Utility rating plan 176.00
Policy Options and Endorsements
Building Ordinance or Law 10% 10,000 18.00
Modified Replacement Cost 176.00
Total Annual Premium 1,247.00
It seems very high compared to what I expected. I was expecting the insurance be around $800. Just some information on the property I purchased. The purchase price is $33,000 and it is a duplex. Based on this, does the premium seem reasonable?
the business coverage should cover all of your rentals. ask if you buy another property, if this business coverage covers things that happen at other rentals. as for the dwelling coverage, 882 seems very high to me, but you live in a different area than i do. i would call another company or 2. ask landlords around you who they use--most landlords are cheap and will have found a great company already.
I have a very significant umbrella liability policy covering all properties in the particular entity.
On replacement deductible, I go for the LARGEST deductible allowed, I think 5%. I can afford the 5%.
There are other posts on here about same subject. I like to add the following. My wife and I have personally owned OVER 1000 sfrs, and thousands of apts. I have had ZERO fires in 40 years! I can't remember a single claim I've made. I may have had some minimal damage from roof leak, broken pipe etc, but not a single claim.
The only significant damage I've ever incurred was my condos in Cancun during Wilma. I had NO insurance and was actually better off because I didn't have insurance. Rich