A Guide to Landlord Insurance

As a landlord, it’s highly important that you safeguard your property. As unfortunate as it is, extreme damage can occur at any time. Whether it’s a tornado, an accidental fire or flooding from a burst pipe, accidents happen. When these perils strike, you want to be prepared. Having insurance is vital for just this reason. For further assistance, we have collected some information about landlord insurance basics.

What Can Landlord Insurance Do for You?

If that tornado does strike, landlord insurance can protect you from the cost of the damage. For instance, if a storm destroys half of your units, an insurance policy will help you pay for repairs. More than likely, a large portion of the property will need to be rebuilt. If anyone is injured, landlord insurance can also help cover legal and medical costs. However, it usually won’t cover loss of personal property. This means each tenant will have to replace their own belongings.

As a property owner, you will have to meet your deductible before the insurance company steps in to help financially. If you have health insurance, you are probably already familiar with this term. A deductible refers to what you’ll have to pay yourself before the policy goes into effect. If your deductible is $2,500, and the cost of the damage is $25,000, you’ll have to pay the $2,500. The insurance company will then take care of the rest. While a few thousand dollars can seem like a lot, it’s nothing compared to the exorbitant cost of possible damage. As you can see, insurance can literally determine whether your business survives or goes under.

What Types of Landlord Insurance Can You Get?

Dwelling Policy 1: This policy contains the least amount of coverage. If you select this policy, only the actual cash value (ACV) of the damage will be reimbursed. The ACV is essentially the rebuild value of your property, or how much the company believes the rebuild should cost. In this scenario, you will have to pay for a significant amount of the damages. For DP-1, damages include: vandalism, vehicle or aircraft collision, rioting, smoke, volcanic explosion, windstorm and hail, fire and lightning, and internal or external explosions.

Dwelling Policy 2: DP-2 offers a mid-range form of coverage. Rather than covering the ACV, this policy reimburses the replacement cost value (RCV). Therefore, DP-2 policies cover the cost of returning the property to its original state if there is damage. This type of policy also covers loss of income. For DP-2, damages include the scenarios from DP-1 plus: electrical damage, collapse, burglary damage, falling objects, freezing pipes, glass breakage and more.

Dwelling Policy 3: This is the most popular choice for landlords as it offers the highest level of coverage. Whereas anything that falls outside of DP-1 and DP-2 can be easily denied, DP-3 is considered an “all-risk” policy that covers you completely. The few situations excluded from DP-3 policies may include war, government seizure, or nuclear destruction.

A Few Final Tips

  1. You can deduct the cost of your landlord insurance on your taxes. From the perspective of the IRS, this is viewed as a business expenditure.
  1. Optional coverage may be necessary to cover additional events. This can include a variety of scenarios such as upgrades required for new building codes, or stolen property due to theft.
  2. Shop around for quotes before deciding on an insurance company. There is no shortage of companies to choose from, and they will provide you with different types of pricing. It’s always a good idea to know all your options before making a purchase.
  3. Know what kind of insurance you are eligible for. If you reside in the property yourself, this could impact the type of insurance you need. Contact the company of your choice for more information.

How All County Denver South Can Help

All County Denver South Property Management is here to help property owners have confidence in the quality of their tenants and the security of their property through knowledgeable and trustworthy property management services. From managing tenant relationships to lease enforcement, we look forward to working with you to see how your investment can be a long-term, stress-free asset. For a complimentary quote, call us today at (720) 664-4550.

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