Are you a landlord in the Boston area or are thinking about getting into the rental business? If so, make sure you fully understand the required and optional insurance coverage available to you. Having the right insurance in place could mean the difference between a well run real estate business and financial ruin.
Here are several insurance policies every Massachusetts landlord should be aware of:
Owner Occupied Coverage – If you purchase a multifamily building and you intend to occupy the property as your primary residence you’ll be required to obtain homeowners insurance. This insurance will typically cover the building itself as well as all the buildings fixtures. This policy will not cover your tenants personal belonging (or yours if not specifically written in the property).
Rental Property Insurance – Let’s assume you initially purchased a Boston triple decker as your primary residence and then you decide you want to move out and rent the unit you’re currently occupying. It would be a very good idea to contact your insurance agent prior to doing so. When you initially purchased the property you paid for insurance that covers you as an owner occupant, but not as an investor. Once you move out of that property and it now becomes and investment and no longer “owner occupied”. Investment real estate requires different coverage and you’ll need to discuss these changes with your agent. If you don’t switch your policy after moving out, and attempt to make a claim, the insurance company may argue that you had improper coverage and deny any payments to you.
Vacant Property Insurance – If your property ever becomes entirely vacant for an extended period of time, make sure you alert your insurance agent. There is often a different policy needed for a property that isn’t being occupied due to a higher risk of damage. Vandalism, rodents and frozen pipes are just a few of the many things that are more likely to take place in a vacant building. Make sure you’re fully covered.
Renters Insurance – One of the best things you can do as a landlord is alert your tenants about renters insurance. If there is ever a flood, fire, break in or anything that results in your tenants loosing personal property, they are not covered under your homeowners policy. It’s a good idea to alert them of this fact (during move in) and encourage them to get coverage. Renter’s insurance policies can be obtained for as little as $300 annually for approximately $10,000 in coverage.
Email us (Contact@MandrellCo.com) and we can send you the form we use to educate our tenants about the need for renter’s insurance.
Umbrella Insurance – If you own more than one rental property, you should speak with your insurance agent about an umbrella policy. Simply put, an umbrella policy protects you from any losses that exceed the coverage amount in your property’s policy. Ask your agent if this type of coverage would be right considering your future investment goals.
Anytime you make a significant change to the occupancy or the structure of your investment property, you want to be on contact with your insurance agent. It’s also a very good idea to review your coverage amounts and deductibles to really understand what your policy covers…and what it doesn’t.