What coverage is a MUST? What's unnecessary?

Question

I'm shopping around for insurance for my first duplex. I won't have a LLC for now, no umbrella coverage either. What are recommended values of:

- Liability protection?

- Medical Payments?

- Loss of Rent (what period should be covered)?

- My appraisal value roughly equals asking price. How much over the sale's price should I have the Dwelling be covered for?

- Damage by a Dog (many residents have dogs in the area)?

Do I need PERSONAL PROPERTY to be covered? Am I liable for tenants' personal property damage?

Do I need FIRE damage coverage?

Do I need coverage for damage by a dog (many residents have dogs in the area, but current tenants of this duplex don't have pets)?

Do I need "Other Structures Coverage"? (There's only a low wooden fence and a lawn besides the main structure).

Thanks.

Kevin Hoag · Answer

Hey @Stan Chigintsev what @Chris Moxley said is pretty much spot on.

*Liability is the cheapest coverage on you policy for the amount you can get. I always suggest going to 1mil. and then placing the home under your personal umbrella until you grow more.

*med pay is what I like to call quick pay or hush money. it is liability coverage that can be paid quickly to someone who may have thought they slipped and broke their ankle. However after x-rays it is only a sprain so... here is a check to cover your co-pay or small medical expenses... now go away.  This is a coverage I would have the minimum amount on.

*Loss of rents is typically set a 10% of the dwelling coverage. I would say 12mths time frame is ok.

* if you purchased the home with a loan you will have to get a replacement cost policy. You will not get you choose the dollar amount. Insurance carriers use a calculator that in short looks current market prices for materials and labor and then calculates the reconstruction cost of your home based.

*Damage by animals and tenants are not something covered by any insurance policy. Damage by dog to a human is why you make your tenants buy a renters policy or do not allow pets. If tenant does not have a renters policy I could see somehow someway someone going after your landlord policy. Also check with your state and local city about the dog laws. Some cities have breed restrictions and other laws you should know about.

*You are not liable for tenants personal property. Another reason why they should have a renters policy. You as a landlord do not need this coverage unless you store stuff at the property. Many policies have a small built in amount

*You cannot only buy fire damage coverage. You either get a basic policy (actual cash policy) which covers around 16 named perils or you buy a special form policy (replacement cost policy) this is also known as an all-rick policy because it covers anything that happens suddenly and accidentally that is not specifically excluded on the policy.

*You do not need other structures coverage if you do not have structures that are really worth covering. Look at the deductible. Can you replace most of that fence for 1k? Which is most likely you deductible.

Best of luck. I highly recommend going with a replacement cost policy and spend a few extra bucks to be properly covered. Protect your asset like you cannot afford to loose it.

Chris Moxley · Answer

If you are purchasing a policy for an individual house you will likely have a lot of this coverage thrown in or included.

• I would purchase the highest liability limit available as it will not add much cost.  It might be $500,000 or $1,000,000.
• Medical Payments will be included.  I would not purchase any higher limits here as it is part of your liability limit, which means any claim paid here reduces your limit in most cases.  Also the injured party does not have to prove it was your fault to get this coverage.  
• If this is not included I would purchase 1 year worth of Rental Income
• On value let them do a cost estimator and tell you the value or use what the average cost for a new home per foot is minus the cost of the land. 
• If you mean someone else's dog doing damage to  your unit, the insurance will not likely cover this.  You can require them to have coverage for their own personal property and liability in the lease.  If you mean their dog hurting someone else, this would come down to your pet policy and the type of pets you allow in your property along with your General Liability policy if you are named in a suit as a result of your pet policy or because you own the property.  
• I would not cover the fence separate.  Your perils for this will likely not cover what is most likely to happen and will not cover replacement cost (in most cases)
• If you are purchasing in your individual name and buying a landlord policy see if they can put your personal umbrella over the landlord policy to give you added protection for your personal assets.  
• You likely do not need personal property coverage unless it is a furnished unit.  The stove and other items should be covered under your building limit

Jason Bott · Answer

@Stan Chigintsev

You do not "need" to but anything unless your bank requires it.

That being said,  at a minimum I suggest you get General Liability and Property coverage

General Liability – This covers you against claims of Bodily Injury and Property Damage.

Bodily Injury – This is the most common coverage everyone is concerned about and rightfully so.These are the most common types of claims. It can be anything from a tenant tripping on a step, falling from a balcony, a guest or passerby slipping/falling on the sidewalk.

Property Damage – Example, your building starts on fire, and causes damage to your neighbor. Your ceiling comes down on tenant’s property.

Property – This protects the building from certain causes of loss, like fire, wind, water, etc.

Some secondary coverages you should include

Loss of Rents/Business Income – This coverage replaces your rental income if the building is damaged by a covered loss.

Property coverage highlights,

1) Ideally have Replacement Cost, not Actual Cash Value (ACV). Sometimes on older rentals, ACV may be the only option

2) Special Form, if they don't offer that, then Broad Form. If they only offer Basic coverage, be aware water and theft claims are excluded

3) Loss of Rents equal to 12 months of income

This is not a complete list, but are generally the most impactful at the time of a claim.

Stan C. · Answer

@Chris Moxley, @Kevin Hoag, @Jason Bott

Thank you for the great posts. In insurance brokerage company gave a quote from Lighthouse insurance carrier. They modified it to fit my needs basing on great recommendation on this thread (THANK YOU AGAIN).  It's decently priced but it's only  500k liability so I may have to try to get an umbrella policy from a local NY insurer as well...

But I'm not so sure about the credibility of Lighthouse and likelihood of them approving a claim in case of one. Had anyone had experience with Lighthouse?  The property is in Jacksonville, NC. I'm in NY.

Stan C. · Answer

Thank you @Yonah Weiss,

But I'd like to hear from actual investors based on real life experience.

Anyone please?

Yonah Weiss · Answer

@Stan Chigintsev I know a great Insurance agent who could answer all of these questions for you, for your specific case (if nobody else chimes in) PM me for his contact.

Best of luck on your first duplex!

What coverage is a MUST? What's unnecessary?

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