Property investment is one of the most serious investments a person could ever make; it’s a major commitment that requires lots of thorough planning and budgeting. It’s an even bigger commitment to loan that investment out to another person to take care of and occupy, and it makes sense that all the effort and hard work put into such a tremendous asset would make anyone want to take any possible measures to protect it. Insuring the property, as well as the belongings inside, can help put the mind at ease, and nothing is worth more than that.
Understanding the Coverage
Like car or life insurance, coverage for property is there to provide financial protection if something unexpected were to happen that results in a significant financial loss. Most property owners tend to invest a general property insurance policy. However, for any owner renting out their property, it’s important to get landlord insurance instead of just a basic building insurance policy. Building insurance just covers the outside of the building; damage caused by severe storms, liability costs for trips or falls out on the driveway, theft and vandalism damages, etc. Landlord insurance covers that, but it’s also able to cover any belongings the owner has inside of the property (chandeliers, lights, blinds,). One of the most appealing aspects that can be included in a landlord insurance policy is the loss of income addendum. This policy covers lost income due to any property damages that cause the property to be unlivable, loss of income due to a tenant being evicted or leaving without proper notice, or loss of income due to renovations or transitioning tenants.
Protecting the Tenants
Any landlord should always encourage his/her tenants to take out the maximum amount of coverage for a renter’s insurance policy. The basic policy typically just covers liability inside of the property; if someone were to get injured inside of the tenant’s home, a liability policy would help the tenant cover any medical bills or legal fees associated with the injury. Any renter should seriously consider adding an addendum that covers personal belongings as well, so in the case of a theft or major natural disaster, the financial loss of their belongings could be recovered. Some renters’ insurance policies will also help pay for the tenant to stay in a hotel in the case that their home was found to be uninhabitable for pest control, renovations, or any other reason why they would have to temporarily leave their home.
Actual Cash Value vs. Replacement Cost Coverage
For both landlords and tenants considering insuring the contents inside of the property, they will have to decide between insuring them at actual cash value or the replacement cost value. Actual cost value will replace the cost of the items for the amount they were worth at the time they were damaged or stolen, whereas the replacement cost coverage will pay the actual amount it will take to replace the belongings. Obviously, the replacement cost option is the best route to go, but the premiums can be significantly higher than insuring at actual cost value. It all depends on what the individual budget allows.
Renting out personally owned property can be a great risk as weather and accidents can be unpredictable, and many tenants can be unreliable in their commitment to the rental agreement. It’s a wise idea for any property owner to take the right precautions before lending their facilities to anyone for any reason to avoid any financial pitfalls. In a world where every second of the future is fragile and unforeseeable, it’s reassuring to know there are a few steps people can take to help protect their quality of tomorrow.
