Dear Patty - Landlord Insurance
Monday, April 7, 2014
I am a property manager here in Central Florida, and I have a client/owner who does not want to switch their homeowners insurance policy to a landlord insurance policy. How can I convince you with them change their mind?
Dear Insurance Dilemma:
You are right — your owners definitely need to transfer the homeowners policy to a landlord policy. The main reason for this is the owner will not be living in the house, and most homeowners policies have only a very short time frame that it will allow others to live in the house and still provide coverage.
The good news for your owner is that a landlord policy is generally cheaper than a homeowners policy as it is not ensuring the tenant’s contents, only the structure itself and appliances that are attached to the structure. In addition, landlord policies also provide greater liability protection against injury claims or property damages, and they typically cover legal counsel and fees in addition to damages.
Perhaps the most important protection a landlord policy offers is fair rental income, which protects owners should their property becomes uninhabitable. Under any covered loss, owners are covered for the rental income they would have received from the tenants for as long as it takes to replace or repair the rental unit, up to 12 months. Generally the management company can easily be added as an additional insured and in most cases, there is not a fee to add them to the policy.
Owners should also be advised to obtain both a flood policy and a personal umbrella policy to help protect them and their investment; tenants should be advised to obtain a renters policy that includes contents and liability coverage.
Finally, be aware that if your owners place the property into a corporation such as an LLC, a landlord policy may not be able to provide liability coverage verses a policy covering the owners as a sole investor.
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The ORRA Property Management Subcommittee provides this property-management advice column as a service to ORRA members. The column is intended to provide a general understanding, not as a substitute for individual legal consultation. The column should not be relied upon in specific situations without consulting a real estate attorney.