Whether you own a few single family homes to supplement your income or you’re a full-time real estate investor with a few hundred units, their are 4 safeguards every Landlord should put in action.
1. Loss of Income
One of the apartments in your 4-plex catches fire. The unit is unlivable for the next 4 months while you have repairs done.
Can you afford to be without rent during those 4 months?
Should your property become unfit to live due to a covered loss, Loss of Income will provide you with rent during those months.
Loss of Income is not a separate policy. It’s an endorsement that can be added to your policy (if it’s not already part of your policy).
Note, this doesn’t provide reimbursement if the tenant leaves town overnight and doesn’t pay you. It would only apply if it’s due to a covered loss.
READ MORE: The Legal Side of Entrepreneurship
2. Contents
Do you own any personal belongings in your investment property?
Possibly the refrigerator and stove? Or the curtains? Maybe the mini blinds?
You may not need much coverage for your contents, but if you own appliances, window treatments, etc. and they burn up or blow away, will it bother you to pay for these out of pocket?
3. Liability Umbrella
Your tenant has friends over to grill some brats. Your tenant’s friend slips on the stairs of the deck. As he falls, he grabs for the railing. The railing wasn’t fastened secure enough to brace his fall. The gentleman broke his leg, arm, and wrist in the fall. Your tenant’s friend is accusing you for not properly taking care of the railing.
You find yourself on the hook for his injuries and defense costs.
Your insurance policy provides you, the Landlord, liability protection up to the policy limits. This helps you pay for injuries to another person and legal defense, whether you’re found at-fault or not.
The question is, are your liability limits on your underlying policy adequate?
How much is enough?
If you have $300,000 in liability on your underlying policy and the guy mentioned above wants you to pay for his injuries and defense costs. His bills come in around $500,000. How do you plan to come up with the extra $200,000?
This is where a Liability Umbrella would come into play.
Should you exhaust your underlying liability limits due to a loss you could then lean on your liability umbrella.
Liability Umbrella’s coverage limits typically start at $1 million and go up from there. The cost is minimal.
You have a lot of blood, sweat, and tears in your investment properties to risk losing them to an absurd claim.
4. Renters Insurance
Of course as Landlord you don’t need renters insurance. But let’s talk about your tenants.
At the time a new tenant signs a lease, require them to carry renters insurance.
Each tenant should carry a minimum of $100,000 in Personal Liability.
In addition, your tenant should name you (or your entity) as an Additional Insured on their renters insurance policy.
Prior to moving in, have your tenants provide you with a Declarations Page or Evidence of Insurance as verfication that they have indeed purchased the coverage.
Should they cancel the coverage, the Additional Insured (that’s you) will receive notice of such cancellation.
The average renters insurance policy in Missouri is $15 per month.
Why Should Your Tenants Carry Renters Insurance?
This is just as much of a safeguard for your tenant as it is you, the Landlord.
Your insurance policy doesn’t provide coverage for your tenants personal property. Nor does it provide them with Personal Liability protection.
Let’s say your tenant has friends over. One of their friends falls down on an icy sidewalk. They sue your tenant and then drag you into the lawsuit. IF you required your tenant to name you as an Additional Insured on their renters insurance policy, your tenants renters policy will provide you with first defense coverage.
Where to Go From Here?
Take the time now to be proactive. Don’t wait until things slow down.
This is your livelihood we’re talking about.
Protect it!
What would you add to the list of 4 safeguards for Landlords to put in action?
