Short-Term and Long-Term Rental Homes
Whether you are renting out a property your own on a long-term or short-term basis, special Landlord insurance is required to give you the proper coverage you need to protect your Property and liability.
Landlord Policies cover the following and more:
- Loss of income due to a covered property loss on the home.
- Liability coverage for any negligence on the homeowner's part.
- Contents coverage for appliances, furnishing, etc, provided by the owner.
- Building coverage for covered perils that cause damage to the home.
Living in the Western United States can expose you to a variety of additional natural disasters and variables that you need to be prepared for. Add supplemental coverage to your existing policy or a new one to ensure your secondary or vacation home are fully protected.
Supplemental Policies can include, but are not limited to:
- Flood policies to protect your secondary and vacation home and valuables from major water damage.
- Earthquake policies to protect your secondary and vacation home during seismic events or landslides, which are all too common in the Western United States.
- Umbrella policies to expand your liability insurance in case of major injuries or accidents on your property while occupied or vacant.
Here are some factors to consider when buying homeowners insurance.
What determines cost?
Credit Score: Insurance carriers will run a credit score check to determine whether you qualify for their program and if you do, which program tier you are eligible for. The credit score check is a soft hit, so it will
not impact your score.
Territory: Where your home is located will impact the price of your insurance. The territory determination is primarily impacted by the type of fire department your town has and how close you are to fire hydrants
and fire stations.
Condition of Home: The age of your home, its roof and electrical system, whether there is central heating, aggressive dogs, in-ground oil tanks, swimming pools, wood stoves, and if you have a business in the home all impact the rate.
Limits: How much insurance coverage for your dwelling, contents, and liability you purchase will impact the rate. There are minimum requirements as part of your insurance contract, but you should work with your agent to determine the right amount of coverage for you.
Discounts: Discounts vary from carrier to carrier. One of the discounts that may be available include a discount if your home and auto insurance are with the same carrier. Others include discounts for alarm
systems, renovated homes, and for being a non-smoker.
Bank Requirements
If you're taking out a mortgage to buy your home, your bank will require you to produce proof of insurance
coverage at or before the closing. Some banks insist on escrowing insurance premiums as part of your
mortgage and may require you to pay the first year of your insurance policy in full. If your bank escrows your insurance premium, you are still responsible for making sure they pay your insurance bill, so you may
want to set up a reminder for yourself.
Replacement Cost
When determining the amount of coverage you need for the dwelling limit on your insurance policy, talk to your agent about Replacement Cost coverage. Your agent should be able to determine the amount it would cost to replace the dwelling, which could be substantially lower or higher than the amount you are paying to buy the home. If your location drives the market value higher than what it would cost to build the dwelling, the amount of insurance you need may be lower than your mortgage.
Your bank cannot require you to buy dwelling coverage as high as the mortgage. Even if the building is gone, there is still value in the land. If you are buying a dwelling that would be very expensive to replace but is in a location that drives down
the market value, you may need to insure the dwelling for more than the mortgage.
Deductibles
Deductibles are the amount an insured must pay for a claim before the insurance carrier pays the remainder
of the loss, up to the policy limit. As an insured, you may have some choices in regard to the amount of the deductible. Other deductibles may be required by the insurance carrier, such as a wind or named storm deductible.
Flood Zone Concerns
Before you sign a purchase-and-sale agreement on a home, make sure you have your real estate or insurance agent check the flood zone for the property. Banks will require flood insurance in a high hazard zone (Zone A or V) and the cost for the insurance could be substantial.
Multi-Family Homes
If you are buying a multi-family home, make sure your insurance policy includes Personal Injury coverage. You may also want to require your tenants to buy an HO4 (Tenants) insurance policy and provide you proof of coverage. The insurance policy for your multi-family dwelling will not cover the contents or personal liability of your tenants.
Condominiums
If you are buying a condominium, make sure you review the condo documents to understand what the master policy for the building covers so you know how much insurance you need to buy as a unit owner.
Other Considerations
If you will be renovating the home you are buying and will not be occupying it while under renovation, make sure you discuss this with your insurance agent. After your policy is in place, any time you make any
substantial changes to your dwelling, notify your insurance agent so your coverage keeps pace with the changes.
Homeowners insurance does not cover maintenance issues or wear and tear. Deterioration of a home’s condition could also make it difficult to find an insurance carrier to insure it and could also drive up the cost of your insurance. Make sure you protect your investment by taking care of your property.
