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Business Tips: Landlord Insurance

The Importance of Having Landlord Insurance

by Melissa Hathaway, Landlord Insurance Specialist

With a slowdown in the property retail market, the foreclosures and the mortgage problems for new buyers, the retail market has become more important. This is why in some parts of the country rental costs are becoming equal to mortgage payments and even exceeding them. The demand for rental properties is improving.

The increase in TV programs on how to improve properties for rent and the increase in rental yields has made renting out a profitable business option. If you are new to this, it might be worth considering one element of the rental market, which is the pros and cons of landlord insurance.

Reasons for Landlord Insurance

Renting out properties is a risk for a number of reasons. The basic risk is financial and revolves around renting as a business. Can you make enough money to pay off any costs for buying the property and renovating it or fitting it out? Are there enough potential tenants to fill your properties and can you reach a good yield on the property in the long term?

Landlord insurance is unable to help with the basics of the rental property market, what it does do is work in the same way as any other insurance. It is a calculated risk, a rainy day protection plan that is hoped to never be used. The risk comes in paying money when nothing might happen or not paying money monthly and something catastrophic happening to the property you are renting out.

There are several of causes of major payouts by landlords. These tend to fall into two categories.
  1. The first are events under no one’s control. Such events include flooding in the basement, snow storms that collapse the roof, subsidence, crashes, and so on. These cause a lot of damage and landlord insurance is designed to help protect against that.
  2. The second major category is the bad tenant issue. Bad tenants do not look after the property they are living in. Their damage and neglect can lead to serious costs to repair all areas of the house or apartment you are trying to rent out. Sometimes, in extreme cases, this leads to the need to fix structural problems. While in some cases it is possible to sue former tenants, having landlord insurance can cover these costs.

Home Insurance vs. Landlord Insurance

Traditional home insurance is designed to be used by home owners and does not consider the property to be commercial. It will protect the building from damage and a loss of contents (if it includes contents insurance). If you faced either a natural disaster or disastrous tenants, the home insurance deal would cover repairs to the building and replacing electrical and furnishings that you own, but it would not cover a loss of earnings.

That is the main difference between the two types of policy. Dedicated landlord insurance will do just that. While some letting agencies can provide the cover for you should the property be un-let during their watch, the landlord insurance will cover a lack of rent due to the property being uninhabitable. It should also cover repairing the damage if it was not your fault and the loss of any contents caused by the same problem.

Types of Landlord Cover

Naturally with such policies, companies offer a range of landlord insurance policies. Some of these policies may combine all of the following elements. First, there is building insurance, which covers costs incurred in repairing the structure. Second, there is contents insurance for the furnishings and electrical goods. Third, is liability insurance, which covers you against any lawsuits that may be caused by problems like flooding or other damage.

Alternative accommodation insurance will cover the cost of paying for your tenants to live somewhere else while you repair the property. There is also loss of rent insurance, as noted above, that helps you make up for the loss of earnings in this period. There are also policies for legal cover, rent guarantee cover, accidental damage and emergency assistance.

Making a Choice

When making a choice about landlord insurance it is important to consider a lot of factors. Firstly, are you going to rent one or more properties? Ask yourself questions about the location, such as about the people who live there, crime rates, risk of natural disasters from flooding to tornadoes, what contents are you providing with the place and so on. You also need to look at yourself as a person and as an insurance policy holder in the past.

These companies will examine whether you have taken a policy out before, who with and whether you have made insurance claims. Naturally, having made no claims in the past will stand in you with a good chance of a lower premium.


Melissa Hathaway is a freelance writer and landlord insurance specialist who also works in the private care field.


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