What Type of Insurance Policies Fully Cover Rental Property Investments in Sacramento?

Insurance needs to be a part of every Sacramento investor’s risk management plan. The uncertainty of our personal property and economic stability has been more apparent than ever, as we emerge from a year of pandemics, wildfires, floods, and general unrest. 

You know that your rental property is worth a lot of money, so make sure you’re investing in the right insurance policies and the most comprehensive coverage. For new investors or first-time landlords, insurance can be confusing, especially if you’re renting out a home that you once lived in yourself. 

As you’re evaluating and updating your insurance coverage, there are a few key things to consider.

Homeowner and Landlord Insurance 

Homeowner insurance will not cover you sufficiently when you’re renting out a property. If you once lived in the home that you’re now leasing to residents, make sure you convert that homeowner policy to a landlord policy. The insurance you buy as an owner/occupant will cover you and your property and your personal possessions, but when you no longer live in the home, the coverage changes. Make sure you speak to your agent or your insurance company to make this change. Otherwise, potential claims may be denied.

A good landlord policy will cover your dwelling and provide liability protection. The dwelling coverage will pay to rebuild or replace your home in the event of a loss. Other structures on your property will also be covered, such as fences, garages, or storage sheds. The liability portion of this policy is essential because you’ll need to be covered if your resident or a resident’s guest gets hurt while at your property. 

Loss of Rent Coverage for Sacramento Rental Property

You need loss of rent coverage when you’re insuring your Sacramento rental property. 

If your residents need to move out of the property because it’s inhabitable or needs a major repair, you want to make sure you don’t lose any rental income. No one likes to imagine the worst case scenario, but if there’s a major fire that requires renovations and your residents need to be relocated, you’ll still be responsible for your mortgage payments. Having coverage for lost rental income will save you from an even larger loss. 

Consider Additional Insurance Protection

Most insurance policies cover dwelling and liability and maybe loss of rent. 

There are additional coverage options that can be advantageous as you seek to protect your investment. For example, insuring yourself for building code upgrades may be worth the low increase to your premium. If you need to repair or replace your home, you might find that the building codes have changed since your home was first built 20 or 30 or 50 years ago. To upgrade the plumbing, the wiring, or the air ducts in your rental home, you’ll face costs that are much higher than you may have anticipated when you bought the property. You’ll be covered for those increased costs with building code coverage. 

If your rental property is going to be vacant for a while during repairs or renovations, you might need to buy extra insurance to protect it until it becomes habitable. Many investors are choosing insurance to protect them against things like bed bugs.

Require Renter’s Insurance 

While your landlord policy will protect your structure and defend you against liability claims, it won’t pay to replace any of the resident’s personal belongings. Therefore, you should require renter’s insurance from your residents. This will protect them and it will also give you an extra layer of protection. 

If your resident starts a fire by leaving a stove on, your policy will be protected and their insurance will cover the claim. It’s actually quite inexpensive for residents, and a good way to keep the value of their belongings safe.

Talk to your insurance agent, or contact our team at Sacramento Delta Property Management if you’d like to talk further about protecting your Sacramento rental property.