Landlord Insurance – Is it worth it?

October 23, 2015

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Although landlord insurance can certainly offer an additional level of security and peace of mind for property owners, it can also be an unnecessary expense in certain circumstances. It’s best to weigh the pros and cons carefully.

The Upside of Landlord Insurance
One of the primary benefits of landlord insurance is that it can be quite versatile. Coverage will depend on the policy that you purchase, but could include the cost of a tenant defaulting on rent, damages to the property itself, or damages to the contents of your property. Certainly the majority of tenants will pay rent on time and leave minimal damage, if any. Screening your tenants carefully can also prevent problems. Yet all it takes is one bad seed to damage your investment property, potentially costing you thousands of dollars. Not only will you have to pay for damages, but also for the loss of rental income while you are repairing your property.

A further benefit associated with purchasing landlord insurance is that you can deduct the cost on your taxes. This can help offset the amount that you are paying out of pocket for the protection of insurance. With a wide variety of insurers to choose from, you can shop around to find the most competitive rate. Conducting a bit of research using online comparison tools and the assistance of your real estate agent can help you find an extremely competitive rate on the right level of coverage for your needs.

The Downside of Landlord Insurance
Investing in and managing property is not cheap. Purchasing landlord insurance will add yet another expense to the maintenance and repair fees that you already are responsible for, to the tune of $350 or more each year. If you’re already just barely making enough to break even, you may not be able to afford this additional expense. If you’re currently paying an agency to help manage your property, it’s important to remember that part of their job is to screen tenants for you. Theoretically, there should be little chance of something going wrong if tenants are properly screened. Paying for both insurance and an agency’s services could be redundant.

Another issue that landlords have with insurance policies is that they use complicated, confusing language. You may not be sure what exactly is covered in your policy unless you consult with a professional first. It would be unfortunate to pay for a policy only to find out you’re not covered when there is actually an incident at your property.

The Verdict
Despite these downsides, most landlords will find that the risks of being uninsured are too high to go without some basic coverage. If you do decide to purchase landlord insurance, be sure that you read the fine print carefully so that you understand what is and isn’t covered. Reconsider your insurance plan on an annual basis or whenever your circumstances change, to be sure that you’re still paying for the most effective plan.

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