non-owner investment property policy (Landlord Policy)

What is a Landlord Policy?
A Landlord policy (also known as a non-owner investment property policy) is a homeowner policy with unique coverage to protect properties in which the owner does not occupy the dwelling. A landlord policy is specifically designed for specified risks and perils that affect a landlord differently from a traditional owner-occupied homeowner.

NOTE: It is important to understand that by default your landlord policy will not extend coverage for damage caused by natural flood damage. This would mean that if there is a severe rain storm which causes your property to flood, no coverage would be allotted unless added as an endorsement or separate flood policy. Some states may have an exception to this rule.

If however, as severe storm caused a tree to fall on your roof and the hole in the roof caused your property to flood, this most likely would be covered under your policy. Each policy and company is different on how they define flood and pay coverage.

non-owner investment property policy (Landlord Policy)

Landlord policies have lower coverage limits in some areas such as personal property, as the only items that need coverage would be such items as a refrigerator, washer, dryer, stove, etc. This is an apparent difference between landlord and traditional homeowners insurance. A large coverage limit on personal property is not necessary, as the owner will not be storing his/her clothing, furniture and other items in a home that they will most likely rent to others.

These policies are crucial in the event that either the owner or tenant is liable for any negligence causing bodily injury or property damage to others. A very important difference between homeowners and landlord policies is that a landlord policy provides protection against lawsuits arising from both the tenant against the policyowner and other third parties that may submit a claim against the policyowner.

Example: The tenant makes the property owner aware of risks within the property premise that may cause harm or damage to occupants or visitors to the property. The property owner does not take necessary measures to remedy or assess the risk brought to his/her attention. Following making the owner aware, a person is hurt directly from the risk that was brought to the owner’s attention. The incident subsequently results in a lawsuit against the owner of the property.

Another key policy attribute of a Landlord Policy is its "loss of rents" coverage. Similar to “Loss of Use” coverage on a homeowners policy; the loss of rents coverage would reimburse a landlord (or policyowner) with loss of rental income incurred due to a covered loss where the tenant must move out of the property while it is repaired or rebuilt. The traditional Loss of Rents coverage would be a stated dollar amount maximum and 12 months time span. This has now been replaced with “Actual Loss Sustained” or 100% of all loss of rents during the repair or rebuild period.
I have detailed coverage below to illustrate the most common type of coverage a landlord policy would include.
I will start by defining actual cash value, replacement cost and extended replacement costs as these are very important landlord insurance policy attributes. You will have to determine which of these your policy falls into. It is important to understand that you can usually change between the three by calling your agent and updating your policy. All changes must be completed prior to a claim on your policy as this change will affect the payout of your claim significantly. The most common coverage type is extended replacement Cost.

• Actual Cash Value – Is the value of your home minus a deduction for age, wear and tear and other factors

• Replacement Cost – This coverage type pays for loss to your home on a replacement cost basis up to the coverage limit you choose. This would mean, if you have $250,000 dwelling coverage, this is the max that the insurance company will pay. No depreciated value. Coverage is given up to the policy limit on your policy’s declaration page.

• Extended Replacement Cost – This coverage type pays for loss to your home on an extended replacement cost basis up to the coverage limit you choose plus 25% to 200% additional coverage for increases in construction costs or other factors. This would mean, if you have $250,000 dwelling coverage, The insurance company would allow an additional 25% to 200% in coverage to repair or replace your home.

I have detailed the common homeowners insurance policy coverage below:

• Dwelling Coverage – This is the limit that the insurance company would pay to replace your home in the event of a covered loss. It is usually calculated based your home’s information such as sq. footage, roof type, flooring type, and other factors to generate the value needed to replace your home should it be damaged due to a covered peril.

• Separate Structures – This is the limit the insurance company would pay to repair or replace any separate structures in the event of a covered loss. Separate structures include a shed, separated garage, gazebo, etc.

• Personal Property – This limit is the maximum the company would pay to replace any of your personal items such as a refrigerator, washer or dryer in the event of a covered loss.

NOTE: It is important to know whether your personal items are covered under actual cash value or replacement costs. Actual Cash Value will pay at the depreciated value and replacement cost will pay the amount necessary to replace the item with an exact or like kind.

• Loss of Rents - This is the limit the insurance company would reimburse a landlord (or policyowner) for loss of rent income incurred due to a covered loss where the tenant must move out of the property while it is repaired or rebuilt. The traditional Loss of Rents coverage would be a stated dollar amount maximum and 12 months time span. This has now been replaced with “Actual Loss Sustained” or 100% of all loss of rents during the repair or rebuild period.

• Personal Liability - This is the limit the insurance company when you are legally obligated to pay for damages to property or others resulting from negligence on your part. Your personal liability coverage also includes coverage for expenses such as attorney fees, court costs, investigator fees and witness charges when defending you in court. In most cases they will pay you for your time off of work when you are asked to appear in court. All policies handle this differently so it is important to consult with your agent to have a clear definition of how your policy covers personal liability.

NOTE: All policies handle this differently so it is important to consult with your agent to have a clear definition of how your policy covers personal liability.

• Medical Coverage – This is the limit the insurance company would pay for any monies incurred by any non-household member for bodily injury on your premises. This is basically a medical aid to others should they have a bodily injury at your residence such as a slip and fall, etc.

• Building Ordinance - This is the limit the insurance company would pay for the extra expense of rebuilding to comply with ordinances or laws, often building codes, that did not exist when the building was originally built.

• Deducible - Your deductible amount is the amount of money you are responsible for as the insured before the insurance company begins payment.

What additional coverage can I add?

These are just a few additional options that may or may not be available with your policy. It is always important to consult with your agent to find out all of your options so that you may make the most educated decision on which fit your needs best.

• Increase Extended Replacement Coverage on dwelling amount
• Add Replacement Cost on Personal Property Coverage
• Add Identity Theft Coverage
• Add Flood Coverage
• Add a Personal Umbrella

Discounts:

These are a few discounts that your policy may offer. It is always recommended that you consult with your agents to see which of these may apply to your policy.

• New Home Discounts – For New homes built within the last 5 yrs
• Gate Community Discount
• Security System Discount
• Good Credit Discount

Payment Options:

Your Homeowners Insurance Policy has a few different payment options.

• Annual
• Semi-Annual
• Monthly

Recommendations:

These are a few recommendations we have regarding your homeowners insurance.

• Review your policy annually with your insurance agent.
• Discuss the need for a Personal Umbrella Policy with your agent.