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Landlord Insurance and Why You Need It For Your San Diego Rental Property

What is Landlord Insurance and Why Do You need it for Your San Diego Rental Property?

Landlord insurance is different from homeowner’s insurance. If you live in a house now and you plan to rent it out, contact your agent and switch to a landlord policy. Your new insurance will provide three specific types of coverage.

Property Damage

Your landlord policy will cover you if there’s a fire, a theft, vandalism, and even some tenant damage. Make sure you have enough replacement coverage to rebuild your home in the event of a total loss.

If your property burns to the ground, you want to make sure you can build a new house. Use $250 per square foot as a general rule when you’re budgeting to build a house in San Diego. You’ll multiply that by the number of square feet you have.

Take a look at your policy to be sure you have enough coverage. The cost of rebuilding the home varies depending on location, the materials you use, and amenities, but that number is a good jumping off point.

Liability Insurance

A landlord policy also provides protection against claims and lawsuits. There’s always a risk of bodily injury. If a tenant gets hurt, you’ll want to carry enough liability insurance to cover the worst case scenario. Protect yourself with at least a million dollars in coverage.

You can buy a policy with $500,000 of coverage, but it doesn’t cost you that much more to get 1,000,000 in liability coverage.

Loss of Income

When your property has water damage or there’s a fire or some other loss that prevents you from renting it out, you’ll get your rental payments from your insurance company. Water damage is a claim we see all the time, so talk to your agent about how it will be handled. Most policies don’t cover mold, so if there’s mold, you’ll need to be prepared.

Always require your tenants to have renter’s insurance. If they clog the toilet by flushing something down there, and they end up damaging your condo and the condo below you, your policy will probably cover it. But, if your tenant is at fault, you can use their renter’s insurance policy first.

Landlord Insurance Action Plan

Usually, this type of policy will cost 15 to 20 percent more than your homeowner’s policy. Follow this five step action plan to obtain and maintain your insurance:

  • See a broker who can bid multiple companies. This will result in a better price for you.
  • Your broker should be a teacher. Make sure you understand your coverage as explained.
  • Know your policy, especially what it covers and what it doesn’t.
  • Buy on value, not price. You want the policy that provides the best value, not the cheapest one.
  • Don’t waste a lot of time. Do an annual review with your broker to make sure you have the right coverage.

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Hello, my name is Steve Welty. On the broker owner of Good Life Property Management, where we manage single-family homes, condos, and apartment buildings in the greater San Diego area. So today we’re going to be talking about landlord insurance, what it is, and why it’s important you have it. So first off, landlord insurance is not homeowners insurance. So if you live in the house and you’re going to be renting it out, you need to contact your agent and get a quote on landlord insurance. This type of insurance provides three specific types of coverage. The first is property damage. So if there’s a fire, theft, banalism, sometimes tenant damage is even covered, the policy is going to step in and make you hold for that loss. Make sure you have enough replacement coverage to rebuild your home in the event of a total loss. So God forbid the house burns to the ground. You need to be able to rebuild the home, right? So use $250 as per square foot as a general rule of thumb to build a house in San Diego. Times that by the number of square feet in your property. And compare it with your policy and see if you have at least that much. Now check with your insurance agent because the cost to build your home will vary depending on location and amenities and finishes, but that’ll give you a jumping off point. Second is liability insurance. So this coverage protects you against claims and lawsuits. So big one on my mind always is bodily injury if a tenant were to get hurt. This is the main reason I carry insurance is the worst case scenario. Someone gets hurt and they come to you as being at fault. So to protect yourself adequately, you want to make sure you have at least a million dollars in coverage. Now they’ll sell you a policy with 500,000 or less, but it’s not that much more for an extra 500,000 to make it a 1 million total liability. Then you can see it’s a little easier and I know in that you have this protection in place in case a worst case scenario and you’ve got seven figures of coverage. Third is loss of income. So if there’s water damage or fire or something that prevents your property from being rented, then they’re going to step in and make you rental payments so you can make your mortgage payment. Having managed thousands of homes, water damage is the claim we see all the time. So talk to your agent specifically how they handle water damage. For instance, most companies don’t cover mold. So if mold forms, which can happen in 24 to 48 hours of water damage, then they won’t cover it. So understand that. Also understand the bodily injury portion. Those are the two that are on my mind properties I own. So make sure you understand how those types of losses are covered. And then require your tenants to have renters insurance. For instance, if they flush something on the toilet and it clogs the toilet and damages the condo and your condo or your condo and condo below you, etc. Your policy may cover that probably would, but if they have renters insurance and they were at fault, then you can use their policy first. You have to use your policy. So landlord insurance is usually about 15 to 25% more expensive than a homeowner’s policy to give you an idea when you’re getting it quoted. So five-step action plan for getting landlord insurance the right way in maintaining it is number one, see a broker that can bid multiple companies. Okay. So they can bid it out to multiple companies, probably get you a better price too. So brokers should be a teacher. So here she should be able to explain this to you in a way that you understand it and make sure they’re able to do that for finding a new broker. Three, know your policy. Not only what it coverages, it includes, but more importantly what coverages it excludes. Early on, I didn’t understand this and I just kind of want to check that box to get insurance. And when something happens, you learn the hard way that, oh my cheap policy really didn’t provide much coverage. Four is buy on value, not on price. You can check the box and get the cheap coverage that won’t really cover you for anything, but get the policy with the best value and you can only do that by understanding the policy, what it includes and what it does not include. And five, don’t waste a lot of time on it. Just do an annual review with your broker. Do it in the slow season in the winter months, look at all your policies and make sure you have the coverage just right for you. If we can help you with anything, please give us a call and make it a great day.