Owning rental property can be a great asset to your financial endeavors but it doesn't come without risks. Insuring those risks will be a necessary component of your rental property strategy. Kristy Whipple joins the podcast to discuss the benefits of the Landlord package policy.
Below is a transcript of the episode, modified for your reading pleasure. For more information on the topics discussed in the episode, see the links at the bottom of this post.
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Grant FINLEY: Welcome to another edition of Your Insurance Connection Podcast. I'm your host, Grant Finley, and joining me once again today, we have Kristy Whipple. Kristy, thanks for joining us today.
Kristy WHIPPLE: Thanks for having me today, Grant. I appreciate it.
FINLEY: It's great to have you back and today we wanted to talk about something that is in your wheelhouse, a little bit, on the personal side. Landlord insurance. Certainly, anybody who knows property and rents it out is a landlord and they understand that they need protection for their homes, apartments, condos, etc. but can you dive into that a little further? Tell us what exactly this type of protection covers?
WHIPPLE: Sure. So, a landlord package policy is what some companies call it. For example, if a person owns a single family detached home that they rent out, then on the landlord protection policy they would have coverage for the dwelling itself, some personal property that they may own in the dwelling, such as appliances or even if they supply some of the furniture in the dwelling. So in the event there is a covered claim, those things would be covered as well. The landlord package policy will also provide coverage for loss of rent. So if there is a covered claim and while the home is not habitable while it's being rebuilt or replaced then the owner be able to recover the lost rents while the person can't live there. Also, of course, the policy provides personal liability coverage and medical payments. So this would be coverage that would cover if the landlord is negligent somehow due to say, if the basement stairs are in disrepair and the tenant is going down to the basement and trips and falls and hurts themselves because the basement stairs were not installed properly or that kind of thing and they're injured.
FINLEY: So then the medical costs would be covered by the...
WHIPPLE: Right, right. Or sometimes, the tenant - there have been occasions when landlord liability is paid when the tenant has a guest over and say the porch railing is kind of flimsy and the guest is leaning against the railing and falls off the porch and is injured. That's a situation where the landlord liability would pay as well.
FINLEY: So if I own these rental properties then I'm the homeowner. Does my homeowners insurance not cover some of this stuff. Why does there need to be a special landlord protection?
WHIPPLE: So the owner would have to have a landlord policy because it only covers a tenant occupied location or home as a primary residence as opposed to on your homeowners policy, you being the person who owns that property, you live in that house. Sometimes there's a little bit of a difference in premium between a homeowners and a landlord policy because even though the value of the rental property may not be as much as the home that the owner is living in, there's a little bit more of a risk for damage because the tenant does not really have an insurable interest and so they may not use as much care while they're living in the property as you would when you're living in your own home.
FINLEY: Makes sense. So then, as a landlord, obviously I'm responsible for finding my tenants. Can I require that they have renters insurance? Because, obviously you mentioned that if I have some stuff inside the dwelling and it gets damaged I could have some of the protection account for that as well, but obviously if there's damage inside, I don't want the tenant coming to me and saying -
WHIPPLE: Oh, yeah. Absolutely.
FINLEY: So can you require them?
WHIPPLE: Sure. Of course the landlord can put any kind of stipulations in the contract that they want, but it is a great idea to require your tenants to have a renters policy. Some companies that we write a landlord package with will require that the landlord includes that in the contract, that yes, the tenants have a renters policy. But especially in situations with apartment buildings or condos, multifamily type buildings, one of the biggest claims that we see for renters is the possibility of fire. Not only the whole place burning down but if your neighbor has a fire in your unit, then the smoke is going to come through to yours, or possibly if there's any kind of water damage from the neighboring unit, the water comes through everywhere. So those are things that would be covered under your renters policy. Generally, renters policies are very inexpensive too, so they would start out at maybe $20,000 worth of coverage for the personal property and they also provide liability which is a really crucial component of the renters policy. Most companies will provide up to $500,000 liability coverage and that's maybe $15-25 extra per year with the premium, but there are occasions when the tenant has been held liable even if they accidentally start a fire while trying to cook their dinner. It's an accident but they could still be held liable, not only by their neighbors for smoke damage but also by the building owner for the damage that's been caused. It's a good idea to have and not only does liability coverage cover the renter on their premises but it's also world wide so if they go on vacation and rent a condo and they burn that place down, then that liability is going to extend. It's a good idea to have liability coverage just for any reason. Personal offense with social media. A lot of younger people rent and a lot of younger people are posting on Snap Chat and Twitter and whatever, and anything that you put on there you have the possibility of making somebody upset, so it's always a good idea for that too.
FINLEY: So what are some other things to consider if someone currently owns rental property or they're thinking about getting into that? Obviously we've touched on the landlord insurance specifically, but are there some other things that you find people haven't really thought about or come to realize they need that they didn't consider in the first place?
WHIPPLE: Well, some optional endorsements that are available on a landlord package policy - most every company will offer earthquake depending on the age and construction of the home, but that's always a good idea to include that. And Travelers Insurance specifically, out of all of our companies, they will write water, sewer backup coverage on their landlord package which is really, behind wind and hail, that's the second biggest claim that we have regardless of what kind of property you own. That's a great option to have too. We always encourage sewer backup. Some companies - if a person has a trust and the rental property is titled to the trust, then the landlord package policy will extend liability coverage to the trust. There are all kinds of options available but it's a pretty simple and comprehensive policy.
FINLEY: So, if somebody was in the market or they're about to buy some property and they wanted to get this coverage, what would they need to do?
WHIPPLE: They need to call CLH Insurance and we will help them out with that. If it's a single family, or up to a four-unit apartment building, or a duplex, triplex, those can be covered under a personal lines policy. Anything over four units is going to be on a commercial. We have options available for all that, for the property coverage, the structure, any personal property that's owned inside the units, as I discussed, liability coverage, if they need a personal umbrella or a commercial umbrella to protect the net worth. Those are all possibilities and we have the capability of offering the policy for all of those situations.
FINLEY: Perfect. All right well, again, that's Kristy Whipple with CLH Insurance on the personal lines. She's be happy to help you out if you're in the market for a rental property. But, unless you have anything else to add, Kristy, I think that's going to take care of it for today.
WHIPPLE: You can call us at 636.391.0700 or on the world wide web at clhins.com.
FINLEY: Thank you very much for that plug.
WHIPPLE: (Laughter) Thank you!
FINLEY: All right, well we will catch you on the next episode of Your Insurance Connection Podcast.
Your Insurance Connection podcast can be heard on iTunes and Stitcher or by visiting clhins.com/content/podcast. If you like what you’ve heard you can support this podcast by rating and/or sharing it on your social platforms. CLH Insurance is a “Trusted Choice”, independent agency servicing Missouri, Kansas and Illinois. For more information on CLH Insurance, visit clhins.com or call 636.391.0700 to speak with an agent. Until we connect again, thanks for listening.
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Show Notes - Where you can learn more about the people and ideas discussed in this episode.