Insurance considerations when renting your home: Common pitfalls to avoid.
Recently, the Atlanta Journal-Constitution ran several articles about the aftermath of a fatal meth lab explosion in a Gwinnett neighborhood. The lab was being operated in a rental home.
A specialty cleaning expert was quoted by the AJC and said that a staggering 98 percent of the meth labs he sees are in rental properties.
With a surge in the number of homes being rented in metro Atlanta, properly insuring your home is more of a concern than ever.
This is especially important as many homeowners are out-of-state and don’t have a chance to meet their renters face-to-face.
No less important for homeowners is protecting homes they no longer occupy since vacant homes are a target for squatters, vandalism, or other damage to the home left unnoticed for too long.
It’s a serious problem in the region.
More than 300 neighborhoods in metro Atlanta have concentrations of vacant housing exceeding 10 percent, according to the AJC*. In healthy neighborhoods, that number is about five to six percent.
Outlined below, you will find five important insurance considerations when acting as a landlord or owning a vacant home.
Liability – As a landlord, you can be liable for injuries that occur to a tenant or their guests. There are a few ways to help minimize this exposure.
First, regular maintenance to the home will help to reduce many potential injuries caused at the property.
Second, confirm that you have adequate liability limits in place. Liability will come with the landlord policy. Additionally, an umbrella policy can be purchased to obtain even greater amounts of liability protection.
Renters Insurance – Almost all apartment complexes now require proof of renters insurance from the tenants. As a landlord, you can put these same requirements in the lease agreement. This policy is purchased by the tenant and provides coverage for their personal property as well as liability coverage if they are responsible for damages or injuries caused at the residence. If possible, have yourself listed as an additional interest so that you will be notified if the policy is cancelled.
Know your tenants – During these hard economic times, a new tenant can be very attractive. However, doing your homework ahead of time can prevent even greater headaches in the future. Some common tools used are credit reports, background checks and requiring references. This new tenant will have 24/7 access to your property and their actions can become your problems.
Vacant properties – Most insurance companies avoid insuring vacant homes. This is defined as a property that is unoccupied and unfurnished for 30 consecutive days. A traditional homeowners or landlord policy will often exclude or significantly reduce coverage in the event of a loss. If you are in this situation, talk to your agent about other options. There are companies that have policies specifically designed to cover a vacant property.
What policy to have - When the use of your home changes, talk to your agent to decide if your policy should also. Each type of policy has coverages designed for your unique situation. For example, a landlord policy would provide loss of rental income if the home were unlivable due to a covered loss at the home. A homeowners or vacant policy would not.
By Matt Miller
*AJC, 7/31/2011, “Surge in vacant houses heralds community ills”