Important Update for Personal Insurance Customers:
Rental Investment Property Insurance
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Rental Investment Property Insurance
You own the perfect property to rent out, but are you sure you know how to protect it?
The Massachusetts housing market certainly is ripe for aspiring property investors like you. The high price of competition for real estate in the area is leaving many first-time homebuyers empty handed when it comes to finding their dream home, which is creating an even more critical need for rental properties like the one you have. Plus, by owning a condo, townhome, house, or multi-family dwelling that you intend to lease out for six months or more, you can enjoy some consistent short-term cash flow as well as build up retirement reserves for the long-term.
Whether you’re just starting out on this exciting adventure and still seeking the right rental property to invest in to rent out, or you’re already a rental property owner and looking for a more knowledgeable, local insurance agent to partner with, the team at HUB International is here to make sure that you have the right insurance to safeguard your valuable investment and that you fully understand your coverage.
Do you need special insurance for your rental investment property?
In order to determine your insurance needs, we first have to establish whether the property you own and rent would actually be defined as an investment property – by insurance companies and the IRS – or if you’ve somehow ventured into the land of having a rental property business.
Your rental ownership is most likely an investment (and not a full-time business) if you meet the following criteria:
- You do it to earn a profit, but you do not work at it regularly, systematically, and continuously either by yourself or with the help of a manager, agent, or others
- Your landlord-related activities are minimal, such as paying bills, depositing rent checks, keeping records and files, repairing or replacing faulty equipment as needed, and communicating occasionally with your tenants
- This is your only rental property, or you lease just a few units, and you do not plan to occupy the home, yourself, for more than 14 days per year or 10 percent of the time it’s rented
- You rent the property at fair market value
If all, or most, of these conditions describe your rental property situation, or if now you’re more confused than ever as to what your property would be defined as, then the next step is to talk to a knowledgeable insurance agent, like HUB International. We can help you evaluate your rental property use, clearly identify your rental property type, and then help you make sure you have the right protection in place for this kind of investment.
Even if you do not meet the above criteria for having a rental investment property, you could still be a landlord. For example, if you own a duplex, and you live in one unit while you rent out the other unit for periods of six months or longer, then that’s exactly what you are. However, your house would not be considered an investment property (see the third checklist item above), but rather an owner-occupied rental property. And, the insurance implications are quite different in this scenario versus a non-owner-occupied rental property.
What type of insurance do you need for your kind of rental property?
Your rental property may have unique insurance requirements, so the team at HUB International is here to make sure that you have the proper Dwelling Insurance Policy coverage in place for your specific situation.
Owner-Occupied Rental Property
If you own and live in a multi-family home that you also rent to long-term tenants, then your standard homeowners insurance policy should still be adequate protection for your property, belongings, and liability. That being said, it’s very important to inform your insurance agent that you are renting out a unit in your home so that, in the case of a loss, the claims process can move quickly and smoothly.
We also want to encourage you to talk to your tenants about getting their own renters insurance. While your homeowners policy will cover catastrophes that damage or destroy the building that you all live in, your policy will not provide coverage for repairs or replacement of your tenants’ personal possessions or pay for their alternative living expenses if the home is unlivable after a loss. The proper renters insurance policy will not only protect your tenants, but can also safeguard you from a potential lawsuit should a loss happen.
Non-Owner-Occupied Rental Investment Property
This is a slightly more complex landlord arrangement in which you own a property, rent it out, but do not live there. For this type of property, you will require rental home coverage (or landlord policy). In insurance-y speak, this is called a Dwelling Fire and Liability Insurance policy.
A basic policy provides broad coverage for you and your rental investment property – from attached structures, to trees, shrubs, and other plants, to contents in the home that are owned or used by you – against perils, theft, and liability claims, including:
- Fire & lightning
- Windstorm & hail
- Explosion
- Cracking, burning, bulging of heating, AC or hot water system
- Building glass
- Loss of rental income due to a covered loss
- Building loss
- Collapse
- Weight of ice, snow, sleet
- Vandalism
- Accidental discharge or overflow of water or steam
- Debris removal
- Fire department service charge
- Bodily injury and property damage
- Medical payments
While a landlord policy might, in some cases, cost a slight bit more than a standard homeowners policy, it is worth it. This policy comes with increased protection that ensures your investment is secure, that you will be able to bounce back from any losses promptly, and that you can even recoup lost income due to a loss.
Because terms differ widely among insurers, working with an agent who represents multiple insurance companies, like HUB International, ensures that you get the best possible fit and competitive rates for your specific rental property situation.
There are many good reasons to become a landlord today. Seeking out and finding the right rental property to invest in is an exciting adventure in and of itself. Then, the rental income can provide you with a sizeable amount of cash-flow short-term as well as provide additional retirement income down the road.
But, taking on this new responsibility also comes with a variety of challenges and stressors as well. However, if you partner with HUB International for all your rental investment property insurance needs, we will not let your insurance be one of them. Our professionals will help you select the policy type that is best for you and your specific rental property so that you can have peace of mind that your investment is well protected.
If you are ready for a more personal relationship with a trusted insurance agent that understands your unique investment property insurance needs, then call us today for a complimentary insurance quote at 833-GoCallHUB.
If there is a way to save you money on your landlord policy, HUB International will find it. Among our top-quality insurance carriers, we can typically get you discounts on your premium if you implement these common loss-mitigation systems:
- Automatic backup power generator
- Sump pump batter backup system
- Temperature monitoring system
- Water leak detection and control system
- Hurricane shutters
- Shatter-resistant or hurricane-proof windows
