Everything You Need to Know About Homeowners Insurance for Landlords
Owning more than one home is great, but it comes with problems. Those problems are often referred to as tenants. As they are subject to the same financial problems as you, they may pay late, if at all. Homeowners insurance for landlords protects you from just such a risk.
Theoretically, being the owner of a second or third home should bring in a second and third stream of income. This is only true if your tenants do not default on payments and do not destroy the premises. The deposit that tenants pay upon the inception of the renter’s agreement should not be used for defaulting tenants. This money is a deposit for any damage they may cause to the actual property and should be reserved for this. Homeowners insurance for landlords covers the following:
1. Defaulting Tenants.
If the home is still financed (that is there is an outstanding bond on the property), and you require the tenant’s rent to pay for the bond, then homeowners insurance for landlords will cover the defaulted amount.
Should the tenant default on rent, then you may claim the money from the insurer. The insurer will, in turn, via legal processes, recover the money from the tenant. It works in much the same way as third-party car insurance. If a third party causes an accident you’re involved in, your insurer will pay for the accidental damage to repair your vehicle and then reclaim it from the third-party or his or her insurance company.
2. Legal Bills.
Homeowners insurance for landlords also includes legal fees. Should a tenant default on payments and you wish to recover the amount owed from him or her, then your insurer will cover the legal fees. If the tenant gets evicted, then the homeowners insurance policy may help with the legal proceedings to that end too.
Evicting tenants is a difficult litigious process, especially considering the Consumer Protection Act (as tenants fall under the ambit of consumers). It makes having homeowners insurance for landlords a necessity for all homeowners with more than one property.
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