Carry Adequate Insurance

Make sure you care enough liability and property insurance on each of your rental properties.  A well-thought out policy can protect you from judgments,  lawsuits, attorney’s fees, storms, burglary, fire, careless tenants, and “mayhem”.

If not raccoons, then storms like Sandy, or at least your tenants, will cause damage to your rental properties.   You need to make sure you carry adequate insurance to rebuild your property if your tenants burn it down, or a hurricane washes it away.

I recommend:

1. Guaranteed Replacement: Get a property insurance policy that has “guaranteed replacement”, to ensure that you are able to rebuild your house if anything happens. Some companies don’t even offer this, but might offer something similar like “Cost +20% increase” which would cover a 20% increase in building materials and labor.
2. Landlord Policy: Make sure your insurance company knows it is a rental property, and that you are a landlord. They may have special clauses that must be included to make sure you get the best possible coverage. For example, most Landlord policies will cover lost rent if your house is vacant for any substantial period of time due to damages.
3. Liability Coverage: Make sure you have Liability insurance – in case your tenants slip on the porch steps and break their arm (or die).  They might sue you for medical bills, lost income, or “mental stress”.
4. Flood Rider: Get a Flood Policy Rider if the property is in a flood zone.  Flood zones are flood zones for a reason. This is a no-brainer.
5. Personal Umbrella Policy: Consider obtaining a separate policy called an “Umbrella Policy”, which covers YOU and all your assets.  It’s a separate policy that goes above and beyond all your other policies.  If you have multiple properties, get an Umbrella Policy for 1-5 million dollars (depending on your assets).  A policy like this might only cost you around $200-$500 year. If any of your other policies don’t cover any or all of  your damages, the Umbrella Policy picks up the slack.  It’s really a sure-fire way to make sure you tenants don’t cause you to go bankrupt or lose your personal home.

I personally use Allstate for all my insurance needs, and get a great discount for having all my policies with them. They have some great policies for landlords and they’ve always been quick to process any claims that I submit.