Finding a profitable rental property can go a long way towards building wealth, but being a landlord in Orange County also comes with its challenges.

Not only will you need to keep up with repairs, deal with tenants, and navigate complex legal issues, but you also need to take steps to protect your investment. Landlords’ insurance policies can go a long way towards reaching this goal.

What is insurance for landlords and what does it cover? Here is a quick guide for you to learn more about the topic.

What Does Insurance for Landlords Cover in Orange County?

Rental property insurance for landlords typically covers two different types of hazards: property damage and liability issues. A landlord’s insurance policy typically includes six key clauses.

  1. Legal, Medical, and Liability Coverage

This will help protect you if someone is injured on your property and sues you for damage. This could include a tenant, an employee, or even a contractor who is working on your property.

As a landlord, you’ll definitely want to have this coverage to protect your assets. It’s also important to note that there are limits to these policies. You might want to also consider a separate umbrella policy to cover any gaps.

  1. Dwelling Coverage

This is a very basic type of property insurance that protects structural damage to your property. This can include things like gas and plumbing problems, structural issues, appliances, internal fixtures, exterior awnings, and more. You’ll also want to have this coverage if your home is damaged from fire, lightning strikes, ice, snow, or hail.

Unless you own the property outright, it’s also very likely that your lender will require you to have this type of coverage.

Make sure you get a policy with “guaranteed replacement cost.” This will pay the entire amount you need to rebuild the structure, even if the costs are more than the home was originally insured for.

Otherwise, your policy may only cover the value of your home at the time that you got your insurance. This could leave you with a gap in coverage.

  1. Water and Flood Coverage

Even if your property isn’t in a flood zone, you’ll want to have water and flood coverage. You could still experience damage from sewer backups, natural disasters, and other water issues.

The good news about this coverage is that it’s regulated by the U.S. National Flood Insurance Program, which means that the cost is the same across the board.

  1. Acts of Nature

Coverage for acts of nature like hurricanes, tornadoes, and earthquakes, isn’t always included in a basic insurance policy. You’ll often need to ask for this as an add-on. You’ll need to weigh the potential costs of damage against the costs of coverage to decide whether it’s right for you.

  1. Fair Rental Income Protection

This insurance is sometimes also referred to as “loss of income” coverage. If your rental property is uninhabitable for a certain length of time like due to a catastrophe or necessary repairs, it will cover your lost rent.

It’s important to note that these policies usually won’t cover you if your loss is due to an eviction or having renters who don’t make their payments. It’s really meant to cover loss due to property damage.

Some property owners find that this type of coverage is too expensive and decide to self-insure this risk instead. You’ll need to consider how long you can cover a loss of income to determine whether it’s a good investment.

  1. Personal Property Protection

If you’re worried about your tenants ruining your property, potential damage from pets, or other issues that are unavoidable, then this insurance is a must. It covers issues like damage to furniture, appliances, carpets, curtains, light fixtures, and other household goods.

This is particularly important if you’re renting out a furnished apartment, but many landlords find that it’s worth it even when renting an empty space. This is another policy that isn’t required but is often a good idea.

You’ll want to weigh the potential costs of damage versus the insurance cost and decide if it’s a good investment.

It’s also important to note that while these policies will cover anything that you leave on the property for the tenant to use, like appliances or a lawnmower, they won’t cover the tenant’s property. For this, the tenant will need to buy their own renters’ insurance policy.

It might be to your advantage to require your renters to get insurance as a condition of your lease. This way, if damage occurs, you won’t have to worry about arguing with the tenant about who’s responsible for replacing personal property. One or both of you will just file a claim and it’s taken care of.

How Much Does a Landlord Policy Cost?

In general, landlord policy insurance costs about 25% more than standard homeowners’ insurance policy. This is worth it, though, because you’ll receive extra protections that aren’t covered under a regular homeowner’s policy.

If you have a mortgage lender, they will require you to have at least a minimum amount of coverage and you’ll have to provide them with proof that you have this coverage. One advantage, though, is that insurance policies are usually tax-deductible for property investors.

Managing Rental Property Doesn’t Have to Be a Hassle

Being a landlord isn’t always easy but making sure you have the right insurance for landlords and working with a great property management company can take off a lot of the stress. Wondering whether property management is right for you?

Contact us today. We’ll answer all of your questions and show you how we can help.