Insurance Policies

…a little rain must fall… Landlords usually focus on ways to cover their losses in the event of catastrophe; however liability insurance should be part of the whole package. A well-designed insurance plan can protect your rental properties from losses caused by everything from fire and storms to burglary, vandalism, personal injury and discrimination lawsuits.

Types of policies. You need to determine what you want your policy to do for you in the event of a claim. A peril policy will provide minimal coverage to protect from specific major causes of loss such as fire, wind or explosion, whereas a comprehensive policy covers all types of accidental losses, except those that are specifically excluded in your policy. Your payout will be determined based upon the loss settlement that you have within your specific policy.

In addition to base coverage, it’s a good idea to include some optional coverage such as: liability, loss of rents, other structures, theft, personal property, vandalism or  valicious mischief (sometimes included in the policy) and earthquake.

Types of settlements. An Actual Cash Value settlement pays for the current value of your property, which is the cost of replacement minus depreciation, based on age and wear, up to the limit in the policy and will have a lower premium. A Replacement Cost settlement pays the amount needed to replace your property (without deduction for depreciation) with new property of like kind and quality, subject to any applicable deductibles and coverage limits. (You must actually replace the property to be awarded a replacement cost settlement. If you do not, or until you do, your claim payment would be based on an actual cash value basis.)

It’s a good idea to review your insurance policies yearly to make sure that your coverage is in line with the value of your property. Shop around and compare quotes. Check with other landlords and business owners for recommendations and make sure that you understand the type of policy, coverage, and settlement that you’ve selected. There’s an enormous difference between the two types of settlements and in the event of a claim, it can add up to a substantial amount of money – these are hard decisions to make and need to be made with care.

Believe me; it’s easier to understand the nuances of an insurance policy before you actually have to file a claim than argue the ‘fine print’ with the adjuster while standing in the smoldering remains of what’s left of your rental property.