Property Insurance 101 – Everything You Should Know to Insure Your Property

home-lifelineOwning real estate – be it as an investment or a personal residence – comes with a list of responsibilities. One of those responsibilities is property insurance. Sadly, most landlords don’t understand how insurance coverage works, which is why they end up getting the wrong type and dollar value of insurance. Some even go out of the way to spend only very little on insurance, an act that backfires when a problem like a fire or lawsuit occurs and their insurance can’t cover it.

If you’re interested in ensuring that your property is covered from all aspects, you and your tenants need to insure it.

Insurance for Property Owners

Dwelling insurance policies conventionally cover the building, separate structures, loss of use, and other important aspects of your property. However, what you should be stressing on are your physical assets and liability and lawsuit coverage.

Physical Assets

The value of physical assets, i.e. building, separate structures, and personal property, determine the limits of your coverage. This is because you need to be reimbursed in case these assets are destroyed. So if you have a 5,000 square foot property and it costs $200 per square foot to fix that structure after damage, your dwelling coverage should amount to $100,000. However, remember that the land isn’t covered since it can’t be destroyed. That aside, separate structures like pools or personal property such as appliances should be evaluated so that your insurance agent can cover them with the right insurance.

Liability Protection

Another type of coverage your insurance should have is liability coverage. With it, any lawsuit related to your property won’t exhaust your pocket. For example, in the case of a tenant’s dog biting one of the neighbors, you too will be sued. With liability protection, your insurance company will provide you with a lawyer who will defend, negotiate or settle up to your policy’s coverage limits. If you need to pay more, you will need to dig into your saving

Aside from these two, you may want to apply for earthquake coverage, flood coverage, and other types in case you need them. An insurance agent will guide you in this regard, but you should do your own research and discuss this matter with other property owners. Once you decide on what you want, shop around for the best deals.

Insurance for Renters

On the renters’ side, there are two types of insurance policies you should recommend to your tenants: renters’ insurance and tenant liability insurance.

Renters’ Insurance

Landlords should guide their tenants to invest in renter’s insurance when they renew their leases. With these insurance policies in hand, renters will be safe from theft, liability concerns, and other mishaps which can cost them heavily. You can tempt them by mentioning that the insurance will cost them $125 and $175 per year. Besides, you too will be protected as claims will first go against the renter’s policy and then your master policy.

Tenant Liability Insurance

Pushing your tenants towards tenant liability insurance will protect you in multiple ways, including if your tenant’s renter’s insurance lapses or if they didn’t get the right type or enough insurance. It will also protect landlords against lawsuits filed by their tenants or insurance deductibles they may have to pay when their properties are damaged. Costing between $120 and $150 per year per unit, this policy covers different aspects, so make sure to find that offers the coverage you need.

Final Words

Life happens, so you need to make sure that you’re protected for whatever it throws your way. Meet up with an insurance agent, do a little research on your own, and thoroughly examine your current policies to make sure that you’re properly covered. If you are, great; but if you’re not, you won’t be able to breathe easy unless you have the right insurance policies in hand.