The Landlord Lens - Landlord Insurance 101

Episode Date: February 24, 2025

Protect your rental property and investments! We're breaking down the essentials of landlord insurance—what it is, why you need it, and how it safeguards your property and income. Whether you're a seasoned landlord or just starting out, this guide will help you make informed decisions about your coverage. Watch now to learn how to secure your rental property like a pro!

I'm Jonathan. This is Krista, and we're here to help you be a better landlord. All right, today we are talking about everybody's favorite topic, possibly in the world, which is insurance. Ooh, I'm so excited. Yeah. The little shiver you just did, I'm sure our audience did that at home. Yeah. Like, oh, they're finally doing it. People have been waiting, they've been begging, they've been sending mail to our office saying, please, insurance now.

Took us a little bit to parse out what you meant by that, but here we are. Here we are. We're doing it. Okay, so talking about rental properties and how insurance factors in, let's start with one that we get questions about all the time, which is, what is the difference between homeowners insurance and landlord insurance? Really critical to know the difference. Homeowner's insurance is intended for the primary residence of the policyholder. Landlord insurance is intended for, you guessed it, rental properties. Yes.

Okay, so do people need both? rarely. So if we expound on this, if you have a house hacking situation where you are living with your tenants, you would most likely use a homeowner's insurance policy. If you are not living with your tenants, you should not use a homeowner's insurance policy to insure your rentals. So there is a situation in which, you know, I own a home. I have homeowners insurance for myself, but then I need a landlord insurance policy for my rentals, that's a okay. But if you're house hacking, if you're living with your tenants, you do not need both policies. In fact, you just need to figure out if you're living there or not, and that'll determine what you need. Hopefully you have that part figured out. Fingers firmly crossed.

Okay, so what about renter's insurance? How does that factor into the two we're talking about? Renter's insurance is a type of policy that covers your renter and specifically their belongings. So I think it's a pretty critical piece of the insurance pie to make sure that everyone is properly covered and protected. So if they experience property damage, impacts their belongings, they would go through their renter's insurance first. So better to have it than not have it, in my opinion. Absolutely. So landlord insurance in most cases is going to be what people should use for their rental property unless they're living there. Correct. Okay, so to put it simply, for most landlords who do not live in their rental property, they'll use landlord

insurance to cover their side of things. And then they should require renter's insurance for their renters to have their things covered. Is that fair? That is fair. And in fact, we ran a survey recently, 72% of landlords require their tenants to have renters insurance. I also asked renters about their experience if they was required on their end. And 16% of them said it wasn't required, but they opted into renter's insurance anyway, which is a good sign. Yeah. Yeah.

And if you set up your property and turbo tenant, you can actually set whether or not you require renter's insurance. And at that point, we have a partnership with a company called sure, and we send that over to your renters and we make it really easy for them to sign up. So check that out. So going back to landlord insurance, what exactly does it cover? Your mileage is going to vary, but a comprehensive policy should cover property damage, loss of rental income, and liability.

So those are the three main tenants, and there are all sorts of different bits and bobs you can tie in there, depending on what kind of policy you have. There are two popular ones, a DP1 and a DP3. DP1 is more bare bones, super affordable, but it has a list of covered items that is quite short most of the time. And then a DP3 has pretty open coverage. You have a list of things that they don't cover, but it's very short. And that means that it's also more expensive. Sure. Yeah. DP2, we don't talk about that one.

There's no DP2, surprisingly. Not that I could find. It's odd. I know. All right. So if I have an issue and I have landlord insurance, how do I actually file a claim? So what you're going to want to do first and foremost is kind of diagnose the issue. It's likely that your tenant is going to come to you and say, hey, something has happened.

And I would recommend asking them to take pictures, videos, et cetera, as soon as this instance occurs. I would also say if you can make your way down there to do the same, good. Do it. More documentation is going to be helpful than less. You also want to make sure that your tenants are safe before you do anything else. It could be a situation where you need to call the authorities. Landlord insurance typically covers destructive behaviors. So whether that's your tenant or, I don't know, someone drives a car into your house.

you want to make sure that the structure itself is safe to habitate, and that means getting eyes on it. If you can't do it, send someone that you trust over there to get that information, take pictures, take videos, and write down everything that you have in terms of details of the event. Then what you need to do is take that list, that documentation, call your insurance company, let them know what's going on. They are going to send out an insurance adjuster. and when they do that, you want to make sure that the scene is as untouched as possible and is safe. Right. So if let's say that there has been a pipe that broke, but there are also wires on the ground and it's creating like a very dangerous situation. Don't leave it like that.

Switch off the electricity, switch off the fuse box, whatever you need to do. Don't leave it like that. But if it's like a pipe has burst and you need to file a claim, you can clean up the water, but otherwise don't start fiddling with the pipes if you can avoid it. Tell your tenant to do the same. Respect the scene. Let the insurance adjuster come out. They are going to go through and make their own documentation, but keep yours as well. That way, when you do have to file your actual form as indicated by your insurance company, you have enough to build out the story of what happened and file a fully fledged clean. Makes sense. Okay, let's talk natural disasters. They're spooky. And they're happening.

A lot. A lot. And more frequently. And more frequently. What does landlord insurance do in the case of a natural disaster? So depending on your policy and whatever additional policies you've accrued, you are going to want to let your landlord insurance company know as soon as possible that something has gone on, right? Let's say that a tornado has swept through and there's significant property damage. You're going to follow most of the same steps as you would for any other claim, but it's even more

important for you to assess if the property is habitable and for you to know what your responsibilities are legally in terms of rehousing your tenant in the interim. So make sure that you look that up first and foremost, ideally before a natural disaster occurs, that's the best time to have this information. But if you have to do it afterward, make sure that's on the top of your to-do list. Once your tenants are safe and you can actually go there, again, you're going to want to take a lot of pictures, take videos, get notes from them as applicable, and contact your insurance company pronto, because a lot of people are going to be reaching out in your area to try and get these situations solved. You should know that it's probably going to be a longer resolution time than typical,

and so it's better to jump on it right away. You should additionally ask your renters to file their claims with their renter insurance policy as soon as possible to. Time is of the essence. If you see that there are temporary repairs that you can make, that would either make the property habitable or make it safer for people to be around. Do that, but ensure that you are keeping all of your receipts. documenting what you've done, things of this nature, because if you want to be reimbursed by your insurance company afterward, they need proof that you did these acts, right? So keep everything documented.

You can use your TurboTenet account to do that for free. And then finally, you are going to likely have to make a call. Is this a safe place for my renter to stay? And if it's not, make sure you know your legal obligations regarding your tenants and where they will live. An unfortunate reality is that typically after a natural disaster, rents jump up in the area for the availability for the availability. housing units left. So there are some laws in place that prohibit people from taking advantage of natural disasters to increase rent and honor that, even if it's not required in your area. That would be my piece of advice. Yeah. And as we said, natural disasters are more common, especially in coastal areas. And it's been in the news a lot that insurance companies are starting to pull out of some of those

places. Yeah. What do you do if insurance companies are leaving your market? It's scary. First of No one likes to hear that their area is becoming uninsurable, but luckily you do have options. So if you're in a place like Florida or California where this has already happened, I'm sure you're shaking your head and you're like, yeah, this is kind of nasty when it takes place. But what I want to do first and foremost, take a deep breath. You're going to need to do some research, but you are not in all of this alone. There are still insurance options for you, even if the main insurance companies pull out of your state. So as soon as you get the non-renewal notice, which is you, usually one to three months before the policy actually ends.

Contact your insurance provider. Ask if there's anything you can do to keep the policy. Sometimes it'll be a few simple tasks like they want you to cut back on the vegetation around your property if you're in a wildfire prone area. Maybe they want you to install a security camera. Maybe they need you to pay a higher deductible. It is easier to work with your existing insurance company and more cost effective than it is to pursue any of the additional options.

But we're going to go over them anyway. So let's say you've contacted them. they say, hey, there's nothing we can do. We're pulling out. Best of luck to you. If you need to take a second and cry, you can cry. But then investigate your state's fair access to insurance requirements plan. The fair plan is intended to provide really basic catastrophic coverage for different properties, and that could suffice for what you need. It is going to be more expensive than your last policy, but it's better than not doing anything. And I'll tell you why in just a moment. We know how expensive.

It varies quite a bit. So I was seeing in my research like 1.5 to like 1.75 times the cost of your original policy. But again, I think it's going to depend on where you are and how many people are taking advantage of it. If you are exploring that, you see it's basic catastrophic coverage and you want more. I would also say check out surplus line insurance. This is a type of policy that covers unique risks not typically covered by other insurance policies, including places where bigger companies have pulled out and there are homeowners or property owners who need additional coverage.

This too is expensive. There is a certain amount of kind of supply and demand with these types of insurance policies where if they see that there's a high demand because a big company is pulled out, the price is going to increase, which is unfortunate, but it's the reality. If you do nothing, though, if you're like, no, this sounds like a lot, maybe I just won't have insurance, maybe I'm fine. Bad news bears, especially because. most mortgage lenders require you to have some type of insurance covering your property, right? It's their money too. They want to make sure that it's being properly covered. If that is the case and you opt not to do anything after your insurance company says they are pulling out of the state, your mortgage company can step in and buy insurance for you that you pay for at a significantly higher cost.

This is called a force-placed insurance policy, and it's typically at minimum double your original policy. It's pricey. That's not a route I want to take. No, and it doesn't feel good to be boxed into something. So really explore your options first and go down that route, talk to your mortgage lender and see what their requirements are to ensure that anything else you can do meets those versus getting placed into a policy that you didn't choose. Absolutely.

Yeah. If you're looking for landlord insurance, we partner with the wonderful folks over at Steadily. You can log into your free turbottenant account at turbotenet.com and explore their offerings, get a quote. They're great to work with. So highly, highly recommend checking them. out because insurance is a bet that we are making on ourselves and you deserve to have a good betting partner. Yeah, insurance is a necessary evil, but it sure can cause headaches.

Yeah, yeah. And being properly insured is paramount. So again, check them out. Leave any questions you have about landlord insurance in the comments down below. And if you have any insurance stories, we'd love to hear them. Drop them down below. Don't forget to like and subscribe. Tenant is the all-in-one platform for landlords to manage their rental properties. From vacancy to tenancy, we have you covered with industry-leading tools and expert advice. Landlord better from anywhere for free at turbotenant.com.