Rental property insurance is an important part of protecting your investment. Tom Hotaling is an insurance agent in a complex managed by MHN Properties. He has always been helpful with any insurance questions we have, so today he’s joining us to discuss the insurance policy on your rental home investment. We’ll talk about why you need it and what you should be asking your agent.
Homeowner’s Policy versus Landlord Policy
A homeowner’s policy will cover your property and your contents as well as third party liability when you’re occupying the home. A landlord policy covers the home, but not the contents. It also provides third party liability for the landlord and loss of rent. If you forget to change your insurance coverage, you could have some major problems. When you have a loss and you didn’t convert to a landlord policy, you won’t get the loss of rent coverage that you need. This is a problem if you still have a mortgage to pay.
Vacant Properties and Landlord Coverage
Make sure you understand your coverage in terms of vacancy, especially if you’re getting ready to buy an investment home. Most policies have a 60-day vacancy cause, and some have 30 days. If your home is vacant after 60 or 30 days, you won’t be covered. So, if there’s a hailstorm on Day 62, the damage to your roof may not be covered. You have to read your policy, and you have to ask questions.
San Antonio Property Managers as Additional Insured
We use a form from the Texas Association of Realtors that requires owners to name our property management company as an additional insured. This is a good idea because if there’s a lawsuit, everyone will be sued. As MHN is an extension of your rental business and is operating on your behalf. We need to be covered under your insurance policy in addition to your liability policy. It shouldn’t cost anything extra, but if it does, it will only be about $25 per year.
Liability Coverage for Property Owners
Sometimes owners ask why they need $300,000 in liability coverage when their home doesn’t cost $300,000. It doesn’t matter what it costs to replace the home. You need the liability coverage to protect yourself against damages and lawsuits.
All leases at MHN Properties, which are in promulgated by the Texas Association of Realtors, prohibit dangerous dog breeds, above-ground swimming pools, and trampolines. This protects owners from a lot of liability. If you pick up a new policy as a landlord, insurance companies will often inspect your property. If they find an aggressive dog, a trampoline, or a pool, they can cancel the policy or refuse to renew it. Our leases protect your interests as an owner. The top three liability claims involve dog bites, pools, and trampolines. Dog bite claims usually pay the full policy limits, especially if a child is involved.
Owners have to make sure the insurance is up to date and that a copy of the landlord policy is provided to the property manager.
The Texas Association of Realtors Property Management Agreement that we use states that if we don’t have proof of insurance, we will buy a policy for you (just like your mortgage policy).
If you have any questions about landlord insurance please contact Tom Hotaling at (210) 348-8500 or tomhotaling.com.