Is having investor paid insurance on a property a renter has insurance on double insuring ?

Question

Why not just save the $1000 bucks when a renter had renter insurance by removing landlord purchased insurance ?

Jon Holdman · Answer

Because they cover completely different things.  Renters insurance pays for their stuff.  If the place burns down, renters insurance won't cover squat.  If you have a mortgage and don't have landlord insurance, the lender will put a force placed policy in place and you'll wish you were only paying $1000.  If you own the property free and clear then you can "self insure" and pay any damage out of pocket.  Some folks do that.  Insurance is for risks you can't afford to pay for yourself.

Account Closed · Answer

Thanks for confirming. I was wondering if I missed something.  I've never heard of a landlord getting a payout from a renter's insurance policy.

Eric Belgau · Answer

@Westin Hudnall It would be almost impossible to collect a claim from a renter's insurance policy.  The liability portion of tenant insurance policies isn't designed to cover the property of tenancy, and in some way that liability (or aspects of it) will likely be excluded.

There are various ways to mitigate the cost of insurance - shopping around regularly, increasing deductibles, making sure you aren't paying for endorsements that don't apply - but you're highly unlikely to win if you try to make insurance for one thing cover something else.

Account Closed · Answer

I'm wondering if calling it investor's insurance is creating confusion.  It's not investor's insurance.  In this case you are buying a policy for coverage of an SFH as a landlord.  Will you be owning the property free and clear of a mortgage?  If not, you have no choice but to buy a landlord policy.  The lender will require it as part of closing and will require it to be renewed annually.  They will have no interest in your renters having renter's insurance.  They want the collateral insured by the borrower.  What would happen to their collateral if something happened between tenants?  Or if a fire or other hazard unrelated to the tenants caused damage.

If you are planning to own the property free of mortgages, then you can asses the risk as you see fit.

As for the $1700 quote:  were you able to get information on what's changed to make this policy so costly?  Is the property in a flood or fire zone? Ask your agent what's going on with the policy.  Sometimes new agents will give you ALL kinds of things you don't need in order to sell a new policy.

Britt Abbey · Answer

I wouldn't because that $1,000 saved would only pay for a few hours of my attorney's time in the event of a catastrophic event.  If you're entirely self-insured and you don't have a mortgage, there's no reason that you COULDN'T do it... but I would highly suggest you discuss the decision with your accountant and attorney canceling the policy.

Jon Holdman · Answer

That would only cover you if the fire (or whatever) could be proved to be the fault of the tenant.   That wouldn't cover man other cases where the tenant wasn't at fault.

Westin Hudnall · Answer

@Joe Gore  Joe - I often see you make ridiculous comments on the blogs. Get off the blogs if you can't be positive. I never suggested I wanted to do this; I simply posed a question for educational purposes for everyone wanting to read about this topic.

My real estate net worth is over 1 mill so obviously I am not struggling for funds.

Elizabeth Colegrove · Answer

Absolutely NOT they are TOTALLY different. If you have a mortgage you are required to carry insurance! I do not know of a way to reduce the cost of insurance other than a higher deductible. Honestly, when picking my houses I look at the cost of insurance and tax. I have found that those play a huge affect in my profit margin.

Paul Ewing · Answer

I am not sure what you are referring to by investors insurance.  The common term for what you need it landlord's insurance.  This covers the property in case of damage from natural causes, usually has coverage if the renter damages the property or it is damaged by vandals, and also contains liability if the tenant or someone else slips and falls and sues you as the property owner.  You can shop your insurance around and play with some of the limits, but there isn't a lot of things you can do otherwise.  I pay $1450/yr for a landlord's policy through Allstate for a $178k house with $500k liability.  I also pay about $500 for $40k doublewides with $300k liability through Foremost.

Wayne Brooks · Answer

Okay, so when some undetected electrical problem, not caused by the tenant so not covered by their insurance, causes the house to burn down, and maybe kills a person or two (or not), what then.  Then there's tornadoes, hail, etc.  and liability protection for them, doesn't provide liability protection for you.

Is having investor paid insurance on a property a renter has insurance on double insuring ?

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