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Landlords are never through shopping
 for Rental Property Insurance

Also see: Tenant's Insurance

      Property owners have a responsibility to preserve their property, neighborhoods, and to protect tenants, their guests, and the public from harm. Owners and managers must evaluate their risks on a regular basis to determine their possible liability and financial loss, then carry the appropriate insurance to deal with the liability and property damage risks.

      A well-designed and thought out insurance package can protect rental property and managers from losses caused by many types of perils, including fire, storms, burglary and vandalism. (Earthquake and flood insurance are typically separate.) A comprehensive policy will also include liability insurance, covering injuries or losses suffered by others as the result of defective conditions on the property. Equally important, liability insurance covers the cost  of defending personal injury lawsuits.

RHOL was recently contacted by a member in Idaho who is a real estate broker. He had listed a property for sale for an owner who had left the state. While waiting for the property to sell, the owner asked the broker to rent the home for him if he could. The broker did so. Additional liability insurance never crossed his mind. Real estate agents perform similar services all the time.

The tenant slipped on a stairway that lacked a proper hand rail and cracked her foot, so she sued both the owner and the broker. The owner had liability coverage under his homeowner’s policy. A real estate broker usually carries Errors and Omissions insurance, and liability insurance on any property they own or lease. However, the broker was not covered for an accident in a listed property; not even coverage for an attorney to defend him. Whether the broker is liable is questionable, however it will cost thousands in attorney fees to find out. The plaintiff's lawyers know they have caught the broker defenseless.

Landlords and property managers must always carry enough insurance to provide legal protection, at the very least.

Buying Insurance is an Ongoing Process

      Let's look first at the problems facing mom and pop landlords with just a few rental properties. A typical homeowner's insurance policy includes $300,000 to $500,000 in liability. Some of them will still allow a small landlord to extend that liability coverage up to a maximum of five rentals. Beyond that, it is necessary to purchase separate liability insurance along with the property insurance on each property. There is not any company we know of that will write a blanket insurance policy across multiple properties. Each four unit or less building must be written separately. When an investor gets beyond four or five properties, they are often seen as a fat-cat target and should consider a business liability insurance package as well; sometimes that can be done by using an umbrella policy.

      Insurance companies continually evaluate their exposure and target the areas of the casualty business where they think they need to increase, or decrease business, to better balance their risk.  As a result, the insurance business is in a constant state of change. We have experienced huge annual savings by shopping for the company that wants our type of business at the moment. However, the company's claims service must be considered along with price.

      For some years State Farm Insurance had a good policy targeted to the mom and pop landlord. It was reasonably priced, covered the likely risks and included loss of rents. Then, about ten years ago, Allstate went out after the commercial property and landlord business. They introduced a one to four unit small landlord policy targeted to rental housing less that fifty years old, or that had been substantially renovated and updated. The policy was very comprehensive and included $300,000 in liability coverage. It saved landlords about 30 percent over most of their competitors. They also saved owners thousands on a typical multifamily policy.

      Over the years the policy costs have gone up and the coverage has been decreased. Perhaps because of higher than expected losses that have included some related to lead-based paint. Allstate, and others, have also begun mandatory inspections that even include the interior of rental property before they will bind coverage. In some states, like Indiana, they now require a satisfactory credit report on the insured as well. Insurance companies are screening out and refusing to insure high risk landlords, much like landlords must screen for high risk tenants.

      The bottom line is: property owners and managers are never through shopping for insurance. They should always be evaluating risks and seeking quotes from several companies, looking for the one that wants their business at the moment the most. As we learned from the misfortune of our Idaho broker member, we must also be aware of our potential liability in every thing we do.

Here are a few tips on choosing insurance:

• Carry sufficient coverage to protect the value of the property and assets. Make sure the policy covers not only physical injury but also mentions libel, slander, discrimination, unlawful and retaliatory eviction and evasion of privacy suffered by tenants and their guests.

• Carry liability insurance on all vehicles used for business purposes, including any employee's car or truck if it will be used for your business.

Unfortunately, many companies no longer want small landlord business and you may find it more and more difficult to buy adequate insurance at an affordable price.

      However, we may have some good news. One of our members is collecting information from landlords like you. They intend to create insurance specifically designed to meet our needs. Please help them, and all of us, by reading their few short comments, then participating in the study