If you have a rental home or investment property, it is important to know the exclusions and limitation of your property policy. A majority of Landlords have a regular day job and own 5 or less rental properties, and manage the property themselves. My first question to these individuals is whether or not the home is currently occupied. What most do not realize, is that if the home is insured as a Tenant Occupied home, the policy voids after 30 days of being vacant. This means you only have 1 month to re-lease the property or you must rewrite the policy as a Vacant Home policy.
Vacant home policies will likely exclude some things that would normally be covered under the landlord policy, to help the carrier limit exposure to undue risk. These include, but are not limited to, Vandalism and Mischief & Water damage. However, for an added fee you may be able to endorse coverage onto the policy.
Another thing to look out for on this policy, is whether or not it is a Replacement Cost (RC) policy. Most are written as actual cash value (ACV). We often look at this from the aspect of a total loss. Most investors would be happy taking just what they have invested in a property in the event of a total loss, so they opt to only insure it at ACV for the amount they purchased it for plus improvements. What most are not aware of, is that the Insurance company will only pay a portion of partial losses equal to the percentage at which the property was insured. So if you insure a property, that has a RC of 200,000 but you insure it ACV for just 100,000, your claim would be paid at 50% less the deductible.
If you are an investor, I recommend you work with an Agent that specializes in these types of policies to avoid any issues. If your agent isn’t asking all the right questions and explaining the different coverage endorsements available you may have unintentional gaps in coverage. Simply giving your agent the business on your rental home because he is your neighborhood Home and Auto guy and he offers you a bundling discount, may not be the best thing for you in the long run.
