Protecting Your Rental Property 101

Investing in rental properties is a great way to earn extra income. Oftentimes, payments from renters can cover your mortgage and then some. 

Whether you’re a new landlord renting your property for the first time or someone with a robust real estate portfolio, insurance basics are a need-to-know.

Keep these five insurance guidelines in mind to better protect your rental property:

  1. Know what is covered when insuring your rental property

Typically, insuring your rental property can be similar to homeowners insurance. It includes property, liability protection and loss of rent.

Property coverage helps cover the dwelling (building) itself as well as equipment used for maintenance and other structures on the property, such as lawnmowers, snowblowers, garages or fences.

Liability coverage can help in multiple situation, like if your tenant gets injured while falling down the stairs at the house you are renting. If you as the landlord is redeemed responsible for the accident, this can be covered.

loss of rent coverage

Loss of rent coverage can protect landlords against lost rent payments if the property cannot be rented due to an incident that is coverage under your insurance policy.

For example- Fire damage is covered under your rental property insurance policy. A fire occurs making your apartment building uninhabitable, therefore you aren’t receiving rent payments from tenants. Loss of rent coverage can cover those payment up to a certain period.   

Call a Rural Mutual agent to learn more about rental property insurance coverages, quotes and rates. 

  1. Rental properties are more accident-prone, leading to higher insurance costs

Research shows rental properties experience more damage and incidents than owner-occupied properties, therefore insurance for rental properties is typically higher than the cost of owner-occupied homes. When shopping for policies, be sure to ask about bundling options and higher deductibles to help keep costs down. 

  1. Coverage limits should be based on rebuilding your property

A misconception regarding property insurance is that it will pay off your mortgage if something disastrous happens.  Some ill-advised financial experts recommend you insure your property to match your loan or mortgage amount.  The insurance contract states that it will replace/rebuild your property up to the limit of insurance or actual cash value , it does not guarantee that it will pay off your mortgage.  

As the cost to replace your property increases, you have to make sure that your coverages increases as well.  Another important thing to remember is that your homeowners policies will cover some things at actual cash value and some at replacement cost, so it’s important to understand the difference between the two.

  1. Tenants should be required to have renters insurance 

    Landlord and tenant shaking hands after agreeing on renters insurance

Insurance for rental properties does not cover tenants’ personal belongings, so it’s a good idea to require your tenants to have renter’s insurance as well. Give clear guidelines to renters about what limits they need to set for renters insurance. Before handing over the keys, require the tenants’ insurance policy. Organize it by property so you can find it quickly if an incident were to occur. 

  1. Consider adding additional coverage to your rental property insurance policy

equipment breakdown insurance coverage for air conditioners

Review your policy with your insurance agent and see what is covered and what is not. Ask them about additional coverage options for your rental property and/or business:

    • Equipment Breakdown- Systems you rely on, like your water heater, air conditioning, refrigerator, are susceptible to mechanical and electrical failures. If you’re not protected, repairing or replacing this critical equipment can cost a fortune. Learn more.
    • Inflation Guard- Make sure your insurance policy is current with the cost of rebuilding your property TODAY,  not when you first received coverage. 
    • Ordinance or Law Coverage – Cover a loss caused by an ordinance or law that regulates the repair of damaged buildings. 
    • Back-Up of Sewer and Sump Pump Overflow – Get more protection from costly water damage to your property. 
    • Business Auto- Whether you’re a company of one or have a dozen employees, chances are you use some type of vehicle in the course of your work.
    • Business Cyber Liability Coverage Protect your tenants data. We partnered with CyberScout to provide you with proactive, comprehensive data breach and identity theft protection services. 

If you’re looking to rent out your property, be sure to let your insurance company know. If you don’t, all that extra income may disappear due to one of life’s curveballs.

Reach out to a Rural Mutual agent today to start protecting your rental property. When you’re insured with Rural Mutual, you’re not just a number. Every client is important to us, even small business owners.