24 Apr Insurance for rental properties
A rental property can be an important source of supplemental income. However, the moment a disaster strikes and damages that investment property, that additional source of income could be temporarily or permanently eliminated. The proper insurance coverage is necessary to protect your investment, but what type of insurance should you carry on rental properties?
A landlord policy includes coverage for property and liability protection against financial losses. The property portion of the policy covers the dwelling, other structures (detached garages, fences, etc.) and any personal property you use to service the rental, such as lawn maintenance equipment. The liability portion of the policy pays for the medical expenses of any person who is injured on your property if you are found responsible. The policy can be endorsed to add coverage for vandalism, burglary, rental properties under construction, and any upgrades you are required to make to meet building codes if the property is damaged.
Although a landlord policy is a comprehensive insurance policy, it typically does not include flood insurance. Flood insurance must be purchased through the National Flood Insurance Program (NFIP). Before you decide you don’t need food insurance because your rental property is not in a flood zone, you should consider that floods can and do occur in all 50 states, in and out of flood zones. A flood policy will pay for a rental property destroyed or damaged by a flood including the physical structure, plumbing, electrical, HVAC and any detached/attached structures.
Business interruption insurance
Your landlord policy will cover damage to your property and liability coverage if someone is injured. Flood insurance covers you if the damaged is caused by flooding, but what about your lost business income? Business interruption insurance for landlords covers any lost revenue from renters not obligated to pay rent when the unit is being repaired/replaced. The policy will pay based on your financial records of what your income would have been had the loss not occurred. It will also cover operating expenses such as electricity bills.
Are you buying/selling an investment property? Barsh and Cohen has legal professionals who can handle all the legal transactions required in purchasing or selling an investment property. Contact us for a consultation.