Congratulations on your decision to expand your portfolio by purchasing an investment property. A true investment property you have opted not to live in may be put up for rent or eventually flipped for a profitable sale. Until then, you’ll need to make sure you have the right type of property insurance.
Looking for a Dwelling Policy
The traditional homeowners insurance policy offers a number of different coverage options. They typically include property coverage for the main building, contents coverage for your personal belongings, coverage for detached structures like sheds or garages, loss of use (in case you have to stay in a hotel during a covered repair), and medical expenses and liability coverage.
As an investment property owner, you may not need all of those coverages – especially personal property. You’ll want to ask your insurance agent for a dwelling policy that covers the buildings and any other structures on the property so that you are covered against your standard risks – fire, theft, burglary, vandalism, and anything else not excluded from the policy. The dwelling policy will also include liability coverage because you are still, as the owner, responsible for personal injury an individual might incur on the property (such a slipping on ice or tripping over cracked sidewalk).
Personal property coverage is not necessary on an investment property that is rented to others. While your dwelling policy would cover the building itself, any tenant you lease to would be responsible for purchasing his own personal property policy.
While a dwelling policy will give you some protection against liability, there are unique risks involved with being a landlord. It’s important to talk to your insurance agent about the availability of landlord insurance for rental properties in your area. This may be a special policy or it may come in the form of an amendment to the dwelling policy you already have.
This type of coverage will offer special protection against loss of rents in the event of a covered loss and some offer limited coverage for items you may keep on the premises. These may include washers, dryers, dishwashers, microwaves, and any other items you leave on the premises for your tenants to use; and it may also extend to items you leave on the premises to make repairs.
In terms of liability, your needs are slightly different. The liability coverage on a landlord policy may also defend you against claims of invasion of privacy, wrongful entry, or wrongful eviction.
The purchase of your first investment property is an exciting event. Make sure you have the insurance you need to make it a viable part of your portfolio for years to come.