Now you’ve done it! You’ve gone and put a target on your back. Ah! What in the heck?
Okay, okay. No need to panic. Just grab an umbrella and you’ll be fine. Sounds crazy, right? Well, let us help sort out some of the details for you.
If you own rental property, you have just increased your chances of being sued for any damages that your tenants could potentially have while they are living at your location.
Imagine a big red umbrella. Now put your own residence, your cars, your RV, a classic car collection …all of it, underneath ol’ Big Red.
That’s exactly what having the umbrella policy does. Protects you from losing your stuff in an accident that you were not personally involved in. It’s protecting all of that stuff now and in the future.
If you own rental property with a pool, imagine what would happen if a child drowns and/or dies at a pool party? Or what if your tenants have a dog and they bite someone and have to get stitches? Now imagine if the person bitten was a doctor and couldn’t work because of the bite? They will want compensation for time lost from work, right? See where we’re going with this? The list of potential accidents and payouts is huge.
Since you’re the property owner, people are going to look to you for compensation for the death or injury. That’s just the society we live in. Don’t be sad about it; be smart about it.
Once you have the policy in place, you’ll breathe easier knowing that the financial burdens are covered in the policy and not from your bank account.
HOW MANY AND HOW MUCH
The first place you’ll want to check is with your homeowner’s insurance company. Almost every time they will offer you a discount since you already have insurance with them to begin with. It is a separate policy, however, not just an add-on for coverage. The amounts you purchase will be relatively cheap for the amount of coverage you’re going to get.
On average, you’ll pay anywhere from $150-300 a year. Policies start at $1 million and go up from there.
Don’t be confused, this is not overkill in the insurance world. And if you only have one rental property, it might feel like you’re dealing with Monopoly money in regard to these amounts. But those medical and legal and repair fees add up quick!
Please, do all you can to avoid being left to foot the bill for an accident and take this crucial step and get this policy. Even if you are renting to a family member, do not make the assumption you won’t need to have an umbrella policy. You do.
It can be easy to get overwhelmed with details, so keep it simple. According to the Insurance Information Institute, you’ll need to have at least $300,000 of liability coverage on your primary residence and $250,000 on your cars in order to obtain the umbrella policy.
That might sound steep, but remember, you will be getting a small discount on your main policy if you stay with the same company so definitely start there. Most likely, they will want to keep you as a happy customer and will do what it takes to get you the most comprehensive coverage.
Some things to make sure you include in your umbrella policy(ies): your house; your vehicles, your RV, your vacation home and your, of course, rental location(s).
Now, if you buy another property/duplex/etc. after you’ve gotten your first umbrella policy, you can always tweak your existing policy’s coverage to include the new location or you can just get a separate policy for each location. We know many landlords that have a policy on each location instead of one giant umbrella policy for multiple rentals. Do what works best for your situation, obviously.
A CHEERFUL GIVER
When it comes to making this annual payment, you’re going to want to do it happily. One and done, right?
If an accident happens, this will make it easy to breathe a sigh of relief knowing your bank account won’t be drained while you care for your tenant’s immediate needs in relation to the home/apartment or duplex.
Go make the calls you need to make and get outta the rain. 🙂
Until next time,
Weekly Welcome Mat with Angel Przybylski