[A PropertyPak™ Guest Post on Zillow]Homeowners Insurance is not designed for rentals and can even expressly exclude rental properties. Even if your policy covers liability for rentals, the rental property should have property coverage or the landlord will be exposed to risk of loss due to physical property damage or even complete destruction by what otherwise might be covered perils depending upon the particulars of the applicable policy. There are many types of insurance coverage available, which can be confusing when you’re shopping for the right plan.
The basic coverage the landlord needs is a Dwelling Property policy. For 2-4 units, the landlord could be living in a unit full time.
Typically, the following are covered: dwelling structure, construction materials and supplies, building and outdoor equipment, other structures, and certain personal property.
Other things covered under the Basic form usually include debris removal, reasonable repairs, fire department service charges, and loss of rents due to property damage.
Know the Policy and Use a Fully Qualified Insurance Broker
All first-named insureds and those responsible for managing the property should read the policy. As part of a property manager’s service, a manager should know what’s covered and work to transfer risks at optimal cost-benefit and to minimize risks of loss at every opportunity. The self-managing landlord needs to do those things directly.
Forming a solid working relationship with a trusted professional insurance broker experienced in Specialty Dwelling Property forms and all other insurance types will go a long way in helping you decide on the best policy and take care of any insurance-related issues that may arise.
Dwelling Property Policy Forms
There are three types of Dwelling Property forms. The first two types (Basic, mentioned above, and Broad) are “Named Peril.” Under this type, the insurance company will pay for losses due to perils expressly named in the policy. With the Basic and Broad types, the landlord is not covered against unnamed perils; therefore, if the property to be covered is in known or potential hazard zones for unnamed perils, such as among others, earthquakes and/or floods, check the policy for available endorsements or where unavailable, move to the Special form to seek additional policies to cover specific risks excluded even under the Special Dwelling Property form.
The Named Perils in the Basic form are Fire Or Lightning and Internal Explosion. Also generally included as options in the Basic Form are smoke, explosion, vehicle, windstorm, or hail. The Broad form names more perils than does the Basic form.
Options, Exclusions, and Broader Coverage
These forms offer a number of options. Certain things are expressly excluded. The Broad form goes on to cover additional living expenses while the property is being repaired or replaced and covers a number of other things absent in the Basic form. Here’s a quick guide to basic types of coverage as well as policy forms (including options and exclusions information, etc.) you’ll run into during your search.
Lastly, we have the Special form. The Special form is not a Named Peril form. Generally, if the peril is not expressly named, the peril is covered under this category. The Special form extends the greatest coverage and is recommended.
It cannot be overstated that the policy forms are quite specific about the particulars of where and when and under what other circumstances things are covered, excluded, and to what degree. All policies are subject to change in the rapidly moving insurance and real estate industries.
Other Potentially Necessary Landlord and/or Management Insurance Types
However, don’t just stop there in considering insurance coverages for your business. Other often must-have insurance includes: Accounts Receivables, Automobile Liability and Physical Damage, Business Income and Expense, and much more. For more help with these forms and to find out what’s best for your business, it’s best to talk with an experienced insurance professional. For more details and descriptions about the types of coverage, check out PropertyPak’s post about landlord insurance.
PropertyPak™ is Hill & Usher’s Specialty Landlord Insurance division, which as of the date of this guest post, covers Single-Family through Quadruplex properties with online “Request for Quotation” forms available for Arizona, California, Nevada, Oregon, Utah, and Washington. Online forms for other territories and property types are schedule for release in the near future. For insurance and real estate news and research, be sure regularly to visit the PropertyPak™ family of websites.
Hill & Usher, LLC (aka Hill & Usher Insurance and Surety), since 1995, is a nationwide (licensed in 50 states and DC), full-service, commercial-and-personal lines brokerage headquartered in Phoenix, Arizona. Toll free • 800·956·4220.
We extend our thanks to Zillow and especially Jennifer Chan, one of Zillow's capable managers, for working so closely with us in bringing you this critically important insurance information.