The best way to protect your real estate business is with the correct insurance coverage. Property owners who rent their dwellings should ensure they have proper coverage through landlord insurance. Although this type of property insurance is similar to that of a homeowners policy, there are some key differences.
Learn more about the different types of landlord insurance, what it covers, and how Aurora property management can help your rental business run smoothly.
Homeowners vs Landlord Insurance
Every homeowner should carry a homeowners insurance policy in order to keep their property and personal belongings safe. These standard policies cover liabilities from fire, flood, theft, and more. There is, however, even more protection you’ll need if you are a landlord - this is where landlord insurance comes in.
Unlike a basic homeowners policy, landlord insurance provides additional coverages for loss that typically occurs at rental properties. These could include loss of rental income or tenant damage, though we’ll discuss even more below.
Types of Landlord Insurance
There are a few different types of landlord insurance policies, ranging in coverages and payout options.
Dwelling Policy 1 (DP-1): This is the most basic coverage you can get in a landlord insurance policy. The DP-1 category offers very limited coverage, though it still protects you from common losses like theft and fire.
Dwelling Policy 2 (DP-2): For more moderate coverage, the DP-2 category covers slightly more loss. It includes named perils like fire, theft, wind, and hail, as well as damage from the collision.
Dwelling Policy 3 (DP-3): Known as the ‘open peril policy’ the DP-3 provides the most comprehensive coverage for landlords. There are some perils specifically excluded in this policy, but everything else is covered as a loss.
Typically, landlord policies include two types of payout options. You can choose either cash value or the replacement value. With cash value, you’ll receive a cash amount for any damaged items. Replacement value pays out the replacement cost of the item minus the depreciation value.
What It Covers
Depending on the type of landlord insurance you choose, your policy will include some common coverages like Property Damage, Liability Protection, and Loss of Rental Income. These are all highly beneficial in protecting your real estate investment.
Property Damage coverage protects both the internal and external areas of your property from damage due to accidents, natural disasters, vandalism, or tenant destruction.
Liability Protection coverage protects you from any legal costs or medical payments due to an injury suffered by a tenant or visitor at the property. This is especially important if you are found negligent of property care, like an uneven or icy sidewalk or structural issues at the property.
Lost Rental Income coverage protects you in case of a halt in your rental income due to an issue at the property. This could be due to an infestation, mold growth, or other uninhabitable property issues.
The best way to make sure your rental property is fully covered and functioning smoothly is to hire a property manager. An Aurora property management company can help you find landlord insurance that’s right for your real estate investment.
Contact Walters & Company Property Management for more information.
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