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Avoid the 5 Costly Sins of Landlord Insurance

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Avoid the 5 Costly Sins of Landlord InsuranceYou have made the important decision to become a landlord; whether you own a single rentable building or multiple houses, there are now many points that need careful consideration. You will need to consider what type of letting you will offer, furnished or unfurnished, there will be legal formalities to undertake and most importantly you will need to start considering your insurance to protect both you are your investment. This can be a very confusing time, with multiple insurance companies offering different forms of cover, on top of all your other duties as a new landlord. However, get your insurance wrong and you could be in for a costly mistake. To help you avoid this from happening, here are the top five insurance sins and how to avoid them.

The Cheapest Insurance Will Be Enough

Let’s face it, you have given up a lot of you time, money and sweat getting your property ready for the rental market, so do you really want to only have the cheapest landlord insurance available? It may seem like the easier option at the time, but quite often these less costly insurance plans will not cover the wide realm of issues that can arise. You need to look at a policy that also includes any vehicles that you are using for your new business venture.

Tenants are human beings and although you may believe that they will treat your property the way that you do, the answer is that they may not. Accidents happen and when they do it is better to have taken out insurance that can cover all damages, flood, fire, gas etc, than to have to foot the bill in the end.

I don’t Need Qualified Advice

If you know what is what when it comes to insurance, then you may not need to seek professional advice. If this is your first time in the role of landlord then you should seek to know and understand everything before signing on the dotted line. There are many forms of insurance to consider; much like entering any self employed business, there is public liability insurance, landlord business insurance and a whole host of other forms for you to look into. As with any business, if you look upon being a landlord as a form of income, you will need a mixture of many insurance plans.

Remember, that by seeking professional advice, you will make sure that you are personally covered but also that your tenants are also safe.

All Policies Are Pretty Much the Same

This may be true to some extent, but to truly get the RIGHT policy for your needs, you need to do your homework. Start by looking at what you offer to your tenants; is the house furnished, is it mainly gas utilities, what is the area’s crime level? Your business insurance needs to take these specifics into consideration. For example, if the property is in a high crime area then this needs to be your main insurance priority.

Do some local and countrywide research before signing up to the correct insurance for you.

It is Best To Always Renew With The Same Company

If you look at this from a purely administrative level, then yes it may be the hassle free option, but do you always stay with the same car insurer year upon year? Most of us simply don’t stay with the same insurer for life and your business insurance shouldn’t be any different. As you do with your own home insurance, have a look once a year at what other companies are offering.

I Will Just Get Owner-Occupier Insurance

This is perfect if you are living on site and not making an income from renting a single room, but if you do make a living from this rent then you may find that your policy isn’t valid when needed in a time of emergency.

You need to know upfront the type of landlord you are, a business landlord who is receiving a regular income from the property or a live-in landlord that is simply paying off some of their mortgage through the help of a tenant.


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24 comments
jane savers @ solving the money puzzle says April 30

This is an expense I had not thought about. We have some nice small row houses in my city and I have been considering purchasing one with a handy partner as an investment. I have started making lists of expenses and carrying costs, cost of months without receiving rent etc but I did not have this on my list.

How do you decide how much liability insurance you should carry?

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    Grayson says April 30

    This would be a great question for the insurance agent. I am not sure how much liability coverage you should use, but it is important to get enough to cover everything.

    Reply
      noah says May 8

      I believe I have a $500,000 or $1,000,000 US dollar public liability policy on my house in Atlanta.
      Though that might be overkill. $300,000 should cover most situations, but its not that much more expensive for higher coverage.

      Reply
DC @ Young Adult Money says April 30

Insurance is tough because you don’t want to pay too much but you don’t want the cheapest policy. With something like landlord insurance that is very niche, there’s probably not a whole lot of people in the general public who know much about it, which probably makes it even harder to get the “right” policy.

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    Grayson says April 30

    So true DC. Many times the price is what drives people’s coverage amounts, but that shouldn’t be the case.

    Reply
Greg@ClubThrifty says April 30

To be honest, I think our insurance policy only offers one type of landlord policy. We may have to look around to see if we need more coverage.

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    Grayson says April 30

    That is definitely something that you might need to check out.

    Reply
Matt Becker says April 30

Finding the right type and amount of insurance coverage can definitely be hard work. But it’s priceless to actually have good coverage. I’m not a landlord but I think the advice above works well for almost any kind of insurance.

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    Grayson says April 30

    That is very true Matt. Finding the right coverage can be difficult to obtain.

    Reply
Michelle says April 30

I didn’t even think about what will happen to insurance if we decide to rent out our current house. I will have to figure that out now!

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John S @ Frugal Rules says April 30

This is just another reason why real estate is not for us right now. I would imagine that this is a very specialized type of policy and you would not really want to skimp on it by any means.

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    Grayson says April 30

    I am with you on that John. These are things that I didn’t even think about.

    Reply
      Justin says April 30

      Aside from a lack of money right now, I’ve also thought about being a landlord but it seems like a lot information that you need to learn. I’d hate to have something happen to us or a tenant due to a lack of knowledge/coverage.

      Reply
Pauline says April 30

I had a landlord’s insurance for unpaid rents and was really happy when I got to use it. Although it was almost half a month per year so pretty expensive. Now I have good tenants so it’s just building insurance.

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    Grayson says April 30

    Thanks for the feedback on that Pauline. I wonder if it would be cheaper with more competition.

    Reply
Cat Alford (@BudgetBlonde) says April 30

I’ve never even thought about landlord insurance. Seems like it really helped out Pauline from her comment above! Interesting post!

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    Grayson says April 30

    I didn’t know about it either. There are so many things out there to think about when you become a landlord.

    Reply
Brian @ Luke1428 says April 30

Nice post! We just shopped our insurance and found a company with better rates and better plans than the one we had been carrying on our properties the last three years. Definitely need to check around at least yearly to see what new policies might be available.

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Canadian Budget Binder says April 30

Shopping around is a must even if you believe you have developed a close relationship with the company that you are with. Sometimes that’s one way they hope to keep you by building rapport and giving you deals but are they the BEST deals out there. Great post

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Tom Gorski says May 1

Thanks to you for such an informative write up! Had very little knowledge about it. Will surely look forward to implementing these suggestions in future as I have plans to rent out my old house. 🙂

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