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Rental Properties Might Require More Focus on Insurance Policies

Zillow • Nov 15, 2013 at 10:20 PM

By S.E. Slack

Thinking about renting out your home so you can flee to the shores of the Cleve? It can be a good idea, say experts, as long as you remember that, for renters, it’s just a house. Get plenty of insurance, keep good maintenance records and keep in mind that wear and tear is inevitable.

“There are two basic insurance policies for residential property,” said Carla Showalter, partner of Bulk Home Buyers. “Depending on the state and the insurance company, you will either have an actual cash value policy or a replacement cost policy.”

Most insurers define an actual cash policy as one that pays damages subject to depreciation at the time of loss. A replacement cost policy will pay to replace items of similar kind and quality at today’s cost, up to the insurance company’s limit of liability.

It’s important to respond immediately to tenant maintenance requests and follow up in writing confirming the repair was made in a timely manner. Keep a detailed call log of who called when, and why they called to help you prove the condition of the property.

Typically, says Showalter, who spent 20 years in insurance operations, the primary structure will be insured at replacement cost and rented personal property will be insured at actual cash value. Fences and outbuilding are often only insured at actual cash value.

“Tell your renters in writing to get their own insurance for their belongings,” she said. “Their personal belongings are not covered under the landlord’s policies.”

Deductibles are a critical item for a landlord to understand, too. It’s tempting to go with a high deductible to get a lower cost on the insurance policy, but that can come back to haunt you. Deductibles are applied separately to every single occurrence – not just the one time you happen to notice that there is a burn on the counter and red nail polish spills all over the house. Insurers will likely see these two types of damage as two separate occurrences and hit you with two distinct deductibles as a result.

“Normal wear and tear and rough living is considered to be a foreseeable part of a landlord’s overhead,” said Showalter.

Still want to rent out your home or are you looking for a new home with the purpose of renting it out? Get a good agent who will take the time to explain all the ins and outs of rental home insurance. And get great renters.


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