Homeowners who decide to move out of their property and rent it out to tenants need to switch their insurance policies. A homeowner’s insurance policy only covers you when you are the owner and occupant of a home. Once you move out of the property and turn it into an income-producing business, you need to convert to a landlord policy, more commonly known in the insurance world as a dwelling fire policy.

Do I Need Landlord Insurance?

Of course there’s no law requiring it, but often mortgage companies will require it, and it’s certainly prudent, given the litigious society we live in. And it’s not all that much. The insurance you buy will cover the dwelling and protect you against the cost of rebuilding or replacing any part of the property that is damaged in a covered loss. It will not cover any of the tenant’s contents, which is why you should recommend that your tenants get renter’s insurance to protect them against theft and damage of their personal belongings. You also want to include your property management company as an “additional insured”. Management companies usually require this. This will protect you both in the event that a claim is filed or a lawsuit brought against you both. Nearly all insurers will add your management company as an additional insured at no cost.

Guaranteed Replacement Cost is Gone.

Unfortunately carriers don’t offer guaranteed replacement cost anymore. This has morphed into extended replacement cost, which is a factor that a carrier will pay over and above your dwelling coverage limit if the coverage limit itself isn’t sufficient to cover the cost of a rebuild. For single family homes the extended replacement cost is typically 150% but does vary greatly from carrier to carrier, including some carriers not offering any extended replacement cost.

What Insurance Should a Landlord Have?

Your landlord policy should include a few important coverages, beyond the dwelling insurance that’s provided. Liability needs to be a part of your policy, and it should cover you for up to $1 million. You’ll also want loss of rent coverage. If something happens to the home and your tenants need to move out, the loss of rent coverage will ensure you don’t lose any rental income while the home is being repaired. You should also inquire with your insurance agent about earthquake and flood insurance, both of which are not covered by a standard homeowners or landlord insurance policy.

It’s easy to forget that you need a new insurance policy when you’re moving out of your home and putting it on the rental market. If you need help understanding the different coverages involved in a landlord insurance policy or anything pertaining to Los Angeles property management, please contact us at Los Angeles Property Management Group. We can put you in touch with experts that will provide the best answers. Contact David Crown directly at dcrown@lapmg.com.