Congratulations! You’ve finally accomplished the goal of purchasing an income-producing property and with that comes a myriad of questions for which you likely don’t have the answers. For example:
Long-term tenants or Air BnB? What type of policy do I need and what company will insure my property? How much liability coverage do I need? Does my umbrella policy cover the rental if the limits are exceeded? Does the HOA have a master policy???
These are all things to consider prior to investing but oftentimes folks find themselves overpaying for coverage due to the ticking clock caused by the close of escrow. Here are a few helpful hints that you can implement to help save you a few bucks while staying properly covered:
1. American Modern has an appetite for short-term rentals. If you have gone this route, you have probably learned the hard way that most carriers won’t write your property unless you have a long-term lease in place. Fear not as American Modern offers replacement cost coverage up to $1.25 Million and up to $500K in liability.
2. Get to know your HOA master policy. If you are paying an HOA fee on your new investment then that association may have a policy in place that will protect the exterior of the home. This is almost always the case if the property has shared walls like a townhome or condo. Be sure to get a copy of the master policy and review what is covered in order to customize your policy to fill the voids.
3. Less personal property coverage needed. If you rented your place fully furnished then it’s not a bad idea to carry 25-50% of coverage for personal property. If however, you have rented your place unfurnished then far less is needed if it is needed at all. The best practice is to write an itemized list of all furniture and personal belongings that reside in your rental and figure out how much they would cost if you had to replace it with a brand new equal. Total it up and this is how much coverage C is needed.
Hope this helps and please reach out with questions!