How to Choose the Best Insurance for Your Rental Property

We often speak to first time rental property owners about the importance of maintaining insurance on their properties, and how property insurance differs between a primary residence and an investment property. Insurance on your Atlanta investment property, sometimes referred to as “Landlord insurance”, is not just a good idea, it is a must. Real estate investors need to know their investment is secure in the event of a fire, flood, or other disaster. However, unlike homeowner’s insurance investors do not need to be concerned with the contents of the home, that is what renter’s insurance is for. How do you know you’re getting great coverage, at a great price? Find out what you need to know about covering your investment by reading our short guide below.

Choosing a Reliable Insurance Carrier

To get the best coverage, a competitive pricing structure, and great customer service, you need to find a high quality, reliable company. Just like professional property management in Atlanta, not all insurance companies are equal. We recommend looking for an insurance company with an A+ rating from the five insurance rating companies. There are several factors that go into determining an insurance carrier’s rating, but one of the most important factors is their creditworthiness. The company you choose should have good credit and a solid claims payment history. You need to know that if you submit a claim the company who holds your policy will be able to pay it out.

Finding a Company Who Works for You

After you narrow down your list of high quality insurance carriers the next step is to find a company that is easy to work with and puts you at ease. We recommend looking at customer reviews to find out what other rental property homeowners have to say about each company you are considering. Remember, if you experience a catastrophe you will have to deal with your insurance company’s representatives. The carrier you choose should provide a 24-hour claims hotline and customer service. Their representatives should be reliable and professional. If you need help finding a reputable company reach out to a member of our management team for a recommendation. After decades in the property management business we have dealt with countless insurance companies.

Great Rental Property Coverage: What is It?

When you are shopping around for an insurance policy on your rental home what should you expect each policy to cover? At a basic level your policy should cover damages to the structure of the property, damage to any contents that belong to you, and liability associated with having a tenant. We recommend finding a policy that covers your property up to $1 million. As professional property management in Atlanta we cannot stress enough just how important comprehensive coverage is. Although there are many circumstances you can plan for, such as a vacancy or eviction, there are just as many that you cannot anticipate. Lightning strikes, floods, fires, and more could wipe out your investment and leave you with nothing. Proper insurance coverage means that even when disaster strikes you won’t be liable for the cost of repairing or replacing your asset. 

When comparing policies try to find one that includes scenarios such as:

  • Water damage due to sprinklers or faulty plumbing
  • Dog bites
  • Lightning strikes
  • Theft and vandalism
  • Carbon monoxide leaks
  • Arson

These scenarios are not covered on all insurance policies. Even if your policy limit is $1 million you could be left paying out of pocket for losses due to the above situations. That is why it is important to read through the details of what is covered before choosing a policy.

Do You Need a Broad Form for Your Rental Property?

As we stated above not every type of property damage is covered on a basic investment property insurance policy. Basic insurance policies will cover most of the common damages that could occur at your property, such as fire and theft. A broad form policy provides wider protection for specific situations such as explosions or water damage from a sprinkler system. For extra protection many insurance companies offer special form insurance which covers all losses, except those specifically exempt on the policy.

So, which type of policy should you purchase for your investment property? That depends on the level of risk you are willing to take and the amount you want to spend on your premiums. Basic insurance covers the least, and is therefore the most affordable. Broad form insurance provides a wide range of coverage, and will likely cover most circumstances you will encounter. It is more expensive than basic insurance coverage, but still affordable for most rental property homeowners. Special form insurance will ensure your property is covered in almost every scenario, which puts many property owner’s minds at ease. However, it is the most expensive type and can eat away at your profits. As a property owner you should get multiple quotes for insurance coverage and review the details of each before deciding which one makes sense for your rental home and your budget.

What About Vacancy Coverage?

Property owners often ask us if they need a policy with vacancy coverage. In order to decide you need to understand what vacancy coverage is because this type of coverage is often misunderstood. It does not cover a vacancy in which your tenant moves out when their lease expires. It also does not cover the typical costs associated with a turnover such as rekeying and cleaning. Standard vacancies and turnover costs are a predictable part of professional property management in Atlanta. So what does vacancy coverage do? This type of coverage kicks in when a tenant breaks their lease leaving you without rental income. Turnover is expensive, but with proper planning and saving most rental property owners have no problem budgeting for it. However, if a vacancy comes early some property owners find it difficult to cover the costs of a turnover. Vacancy coverage is rarely included in basic insurance policies, but it can make a big difference if your tenant moves out unexpectedly, leaving you without income and with turnover expenses to pay out.

Replacement Cost or Depreciated Cost: It Makes a Difference!

Insurance companies cover losses by paying you for the items that were lost. But the way they determine the value of your lost items matters. Your insurance policy may cover your lost items based on their depreciated cost or their replacement cost . Here is what these terms mean:

  • Depreciated Cost: Your insurance company will value items lost at your rental property based on what they were worth at the time of the loss. For example, your 10 year old water heater is likely worth $100 or less if you were to sell it at a garage sale or marketplace.
  • Replacement Cost: Your insurance company will value an item based on how much it costs to replace that item with a brand new version. For example, if you were to replace your 10 year old water heater with a brand new one you could expect to pay between $500-$1000. 

Policies that cover replacement cost are typically a better use of your money because if a loss occurs this policy will allow you to replace the items rather than just recoup a fraction of the cost to replace them. However, not every rental homeowner wants to replace their rental home after a loss. Before purchasing a policy it is important to decide what you would do in the case of a loss, so you can determine whether you want a policy that provides replacement costs or depreciated costs.

When You Need Ordinance and Law Coverage

Part of our job as professional property management in Atlanta is to ensure your investment property stays safe and habitable for your tenants. But what happens when housing codes change and your property needs to be updated? Costs associated with bringing your property into compliance can be high, which is why some property owners opt for ordinance and law coverage. If you’re considering ordinance and law coverage it may be helpful to speak to one of our professional property managers. Our experienced team stays up to date with local laws and ordinances in order to keep all of our properties up to date. We can help you determine if your home needs this extra coverage.

For Professional Property Management, Call the Experts

There is a steep learning curve when it comes to property management. Not only do you need to know the ins and outs of choosing a high quality insurance company, you need to be an expert in every aspect of the rental cycle. That includes marketing, advertising, rent collections, showing, screening, inspections, and more. Investment property owners who choose to self-manage or hire a “discount” rental property manager often end up making expensive mistakes in at least one of these areas. Don’t settle for anything less than property management provided by experienced professionals. Specialized Property Management Atlanta is the team you need to help you turn your investment into a success. To find out more call us today at 404-596-8454.

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