For starters, make sure your property is on the correct type of coverage form! In many instances, landlords will purchase a property, spend a little time fixing it up, then will rent it out after the repairs are complete. This is perfectly fine; however, it is in your best interest to fully disclose the extent of the anticipated renovations with your agent because a special form dwelling fire policy (which is commonly used to insure residential rental properties) has a couple of key conditions in it:
- While freezing is indeed a covered peril, coverage only applies if you have maintained heat in the building or shut off the water supply and drained all systems and appliances of water. This is obviously a huge problem during the colder months, so pay a little extra to your utility company to keep the heat on in the house. Otherwise, you run the risk of having a large water-related claim go uncovered due to frozen pipes!
- Vandalism, malicious mischief, and theft are all covered as long as the house isn’t vacant. If the dwelling has been vacant for more than 60 days prior to a loss caused by one of these perils, coverage is excluded!
If you plan on taking several months to renovate a property, your property may need to be written with a specialty insurance company until renovations are complete. In many cases, vacant properties are only eligible for basic form coverage (which means you are only covered for a small list of specified perils); however, there are some options in the marketplace to expand the list of covered perils for vacant properties. Once the renovations are complete and a tenant is about to move in, you can put the property back on a standard rental dwelling insurance policy.
In addition, keep in mind that water-related losses such as flood and water backup of sewers and drains are not covered in any type of rental property policy (vacant or occupied), so additional coverage will need to be purchased to properly address these perils.
As always, speak to your local independent insurance agent if you have questions or concerns. They will have the knowledge and the coverage options to properly protect your rental dwelling investment.
For more information on dwelling and rental property insurance, read “Renters Insurance: Why’s It’s Important for Landlords.”
The information provided in this article is general in nature and may not apply to your policy. Please read all policy forms and endorsements in their entirety to determine all policy coverage provisions.
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