Insurance Blog

Vacation Home? Income Property? Here’s How to Cover It

There are many reasons you might want to rent out your home on either a short- or long-term basis. Depending on the rental scenario, your standard homeowners policy may not cover losses incurred while your home is rented out, and you may require a more specialized insurance policy. So, whether you own a second home that you lease to to tenants, want to rent out a spare bedroom in your house periodically though Airbnb, or make a little extra cash renting out your beach cottage the weeks you’re not using it, the first step should be to call your insurance professional. 

Short-Term Rentals/Primary Residence

If you are planning to rent out all or part of your primary residence for a short period of time, for instance, a week or several weekends, there will likely be two insurance scenarios.

  1. Some insurance companies may allow a homeowners or renters policyholder  a short-term rental—assuming they have notified the company. Other insurers will require an endorsement (or rider) to the existing insurance policy in order to provide insurance coverage. 
  2. If you plan to rent out your primary residence for short periods on a regular basis, to various “guests.” this would constitute a business. Standard homeowners insurance policies do not provide any coverage for business activities conducted in the home. To be properly covered you would need to purchase a business policy—specifically either a hotel or a bed and breakfast policy.

Long-Term Rentals/Second Home

If you are planning to lease your home to one person or a couple or family for a longer period of time, say six months or a year, you will likely need a landlord or rental dwelling policy. Landlord policies generally cost about 25 percent more than a standard homeowners policy to pay for increased protections. If you are regularly renting out a vacation home or investment property, this would also require a landlord or rental dwelling policy.  

Landlord policies provide property insurance coverage for physical damage to the structure of the home caused by fire, lightning, wind, hail, ice, snow or other covered perils. It also offers coverage for any personal property you may leave on-site for maintenance or tenant use, like appliances, lawnmowers, and snow blowers.

The policy also includes liability coverage; if a tenant or one of their guests gets hurt on the property, it would cover legal fees and medical expenses.

Most landlord policies provide coverage for loss of rental income in the event you are not able to rent out the property while it is being repaired or rebuilt due to damage from a covered loss. This coverage is generally provided for a specific period of time.

Renters Insurance

As the landlord, your coverage is only on the structure itself and your financial interest in it. Your tenant’s personal possessions are not covered under your policy. In order to avoid disputes arising from damage to the renter’s belongings, many landlords require a tenant to buy renters insurance before signing a lease.

 

Source: Insurance Information Institute (I.I.I.)

12 Ways to Reduce Flood Damage

Here are terrific resources from the Insurance Institute for Business and Home Safety including two of their infographics. Please contact your Baldwin / Welsh & Parker Agent for further information on important insurance coverage! Click Here.

With the beginning of spring, and latest flooding across the country, here are twelve important ways to reduce flood damage. While flooding can occur at any time of year, the spring is a particularly troublesome time of year as snow and ice melts and seasonal rains begin. According to the National Oceanic and Atmospheric Administration (NOAA) and the Federal Emergency Management Agency, flooding causes more damage than any other weather-related event, averaging eight billion dollars in losses and 89 fatalities annually.

As part of the recent National Flood Safety Awareness Week  hosted by NOAA, the Insurance Institute for Building & Home Safety (IBHS) suggests several improvement projects, and last-minute actions (with two accompanying infographics), for homeowners to help protect their property against flood damage this season. IBHS has additional flooding property protection resources on its website at:www.DisasterSafety.org/Flood.

Flood Resilient IBHS infographic 2014

 

Home Improvement Projects

  1. Raise Electrical System Components – Hire a licensed electrician to raise electric components (switches, sockets, circuit breakers and wiring) at least 12 inches above the base flood elevation (BFE) for your area. You can find out your property’s BFE by contacting your local building department. Raising electrical system components above the anticipated flood level will help prevent damage to the electrical system and avoid the potential for fire from short circuits in flooded systems.
  2. Raise Or Floodproof HVAC Equipment – Floodwaters can extensively damage heating, ventilation, and cooling (HVAC) equipment. The extent of the damage depends upon the depth of flooding and how long the equipment is underwater. A good way to protect the HVAC equipment is to have a contractor move it to an upper floor or build a flood-proof wall around the equipment.
  3. Direct Water Away from Building – Make sure your yard’s grading (slope) directs water away from the building.
  4. Anchor fuel tanks – Unanchored fuel tanks outside your home can damage your building or be swept downstream, damaging other properties. The supply line to an unanchored tank in your basement also can tear free and fuel can contaminate your basement.
  5. Install Sewer Backflow Valves – Flooding in some areas can cause sewage from sanitary sewer lines to back up through drain pipes. Backflow valves are designed to block drain pipes temporarily and prevent return flow into the house.
  6. Protect Wells From Contamination By Flooding – Floodwater that enters a well can contaminate it and make the water unsafe to drink. A licensed well-drilling contractor can inspect your well and suggest improvements.

In addition, when a flood is forecast for your area, IBHS recommends homeowners take these last-minute actions to protect their property against flood damage:

  1. Clear drains, gutters and downspouts of debris.
  2. Move furniture and electronics off the floor, particularly in basements and on first floor levels.
  3. Roll up area rugs, where possible, and store them on higher floors or elevations. This will reduce the chances of rugs getting wet and growing mold.
  4. Inspect sump pumps and drains to ensure proper operation. If a sump pump has a battery backup, make sure the batteries are fresh or replace the batteries.
  5. Shut off electrical service at the main breaker if the electrical system and outlets will be under water.
  6. Elevate and Place all appliances, including stove, washer and dryer on masonry blocks or concrete at least 12 inches above the projected flood elevation. 

Flood Prepare IBHS Imminent 2014 

About The Insurance Institute for Business & Home Safety (IBHS)

IBHS is an independent, nonprofit, scientific research and communications organization supported by the property insurance industry. The organization works to reduce the social and economic effects of natural disasters and other risks on residential and commercial property by conducting building science research and advocating improved construction, maintenance and preparedness practices.

Sunday, 30 April 2017 23:41

Your Renters Insurance Checklist

What to Look for When You’re Shopping for Renters Insurance

move in boxes

If you rent a house or apartment, your landlord’s insurance will only cover the costs of repairing the building if there is a fire or other disaster. To financially protect yourself and your belongings you will need your own coverage, known as renters or tenants insurance.

Renters insurance includes three key types of financial protection: 

  • Coverage for Personal Possessions
  • Liability Protection
  • Additional Living Expenses 

The following checklist can help you choose the right coverage when you are shopping around for renters insurance or discussing your needs with an insurance professional.

A. Coverage for Personal Possessions

1. How much insurance should I buy?

Make sure you have enough insurance to replace all of your personal possessions in the event of a burglary, fire or other covered disaster. The easiest way to determine the value of all your personal possessions is to create a home inventory—a detailed list of all of your belongings along with their estimated value.

The Insurance Information Institute offers free Web-based home inventory software, available at www.knowyourstuff.org.

2. Should I choose replacement cost or actual cash value coverage?

Actual cash value policies include a deduction for depreciation. Replacement cost coverage costs more—but can be well worth the extra expense when the time comes to replace your belongings.

3. What disasters are—and are not—covered?

Renters insurance covers you against losses from fire or smoke, lightning, vandalism, theft, explosion, windstorm and certain types of water damage (such as when the tenant upstairs leaves the water running in the bathtub and floods out your apartment’ or from a burst pipe). Most renters insurance policies, however, do not cover floods or earthquakes. Flood coverage is available from the National Flood Insurance Program and a few private insurers.. You can get earthquake insurance as a separate policy or have it added as an “endorsement” to your renters policy, depending on where you live.

4. What is my deductible, and how does it work?

deductible is an amount of money you pay out-of-pocket before the insurance coverage kicks in. Deductibles are generally available as a specified dollar amount; the larger the deductible, the lower your insurance premium. You will be responsible for paying the deductible each time you file a claim, so keep this in mind when determining your insurance budget.

5. What is a “floater” and do I need one?

If you have expensive jewelry, furs, sports or musical equipment, or collectibles, consider adding a floater to your policy. A floater is a separate policy that provides additional coverage for your valuables if they are lost or stolen.

6. Am I covered if I am traveling or away from home?

Most renters polices include what is called off-premises coverage, meaning that belongings that are outside of your home are covered against the same disasters listed in your policy. For example, property stolen from your car or a hotel room while you’re traveling would be protected.

B. Liability Protection

1. Do I have enough liability insurance?

Renters insurance provides liability protection that covers you against lawsuits for bodily injury or property damage done by you, your family members and even your pets. This coverage pays for both the cost of defending you in court and court awards—up to the limit of your policy. Make sure the amount of liability coverage provided by your policy is sufficient to protect your assets.

Your renters policy should also include no-fault medical coverage as part of the liability protection. Medical payments coverage allows someone who gets injured on your property to simply submit his or her medical bills directly to your insurance company so the bills can be paid without resorting to a lawsuit.

2. Do I need an umbrella liability policy?

If you need a larger amount of liability protection, consider purchasing a personal umbrella liability policy. An umbrella policy kicks in when you reach the limit on the underlying liability coverage provided by your renters or auto policy. It will also cover you for things such as libel and slander.

C. Additional Living Expenses

What happens if I can’t live in my home after a disaster?

If your home is destroyed by an insured disaster and you need to live elsewhere, renters insurance provides additional living expenses (ALE) coverage, which pays for hotel bills, temporary rentals, restaurant meals and other expenses you incur while your home is being repaired or rebuilt.

D. Discounts

Insurance companies often offer discounts on renters insurance if you have another policy with them for your car or business. You can also get discounts if you:

Have a security system

Use smoke detectors

Use deadbolt locks

Have good credit

Have multiple policies

Stay with the same insurer

Are over 55 years old 

Companies offer several types of discounts, but these can vary widely by company and by state, so review your options carefully. As always, the same rule-of-thumb applies: Shop around for the best deal.

Our Baldwin / Welsh & Parker (BWP) are happy to be of assistance and can help you find the best options!

 

Source: Insurance Information Institute (I.I.I.)

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