Landlord insurance, also known as rental property insurance or real estate insurance, is a type of insurance policy designed to protect individuals who own and rent out residential or commercial properties. This insurance covers various risks and liabilities associated with being a landlord, which is why it’s fundamental to operate a rental property.
We previously gave an overview of landlord insurance and how to make sure your policy has the fundamental items to protect your investment. This time, we’ll go deeper into the intricacies of landlord insurance in Alberta to help you understand your policy and make the best use of it.
Landlord Insurance In Alberta Coverage Breakdown
The specific coverage can vary among insurance providers, but here are the basic components every landlord insurance policy must have:
Liability Claims
Liability coverage protects landlords if they are found responsible for injuries to tenants, visitors, or others while on the rental property. If you are sued and found liable for the incident, this portion of the insurance will cover medical and legal expenses, and other costs associated with the claim.
Property Structure
This portion of the policy protects the physical structure of the property, including the building itself, as well as built-in appliances, flooring, walls, and other structural components. It typically covers damages caused by perils out of your control, such as fire, storms, vandalism and theft.
Personal Property
This covers personal property that you, as the landlord, may own and provide for use in the rental property. Typically includes appliances, furniture, or other items you have furnished in the rental unit. It does not cover the tenant’s personal belongings, which are their responsibility to insure through renters insurance.
Additional Coverage
Depending on the nature of your rental business and property needs, you may want to add extra coverage to your policy. These are some of the additional items you can ask your insurance broker when discussing your insurance details:
- Workers’ compensation: if you own several rental properties and count on staff or maintenance workers, consider investing in workers’ compensation coverage to cover your employees in case of injury while on duty.
- Umbrella liability: this is an additional layer of liability coverage that goes beyond the standard liability coverage limits in a landlord insurance policy. It supplements your existing liability coverage, providing more protection if you face a large liability claim. If a claim exceeds the limits of your regular policy, the umbrella policy kicks in to cover the excess amount up to the umbrella policy’s limit.
If you own multiple rental properties, an umbrella liability policy can provide coverage that applies collectively to all covered properties. This can be beneficial if a liability claim involves several properties. For example, if you face a liability claim that exhausts your legal and medical expenses contemplated in your primary coverage. Your umbrella liability coverage will take care of the additional costs.
Remember that coverage details and limits can vary, so reviewing and understanding the terms and conditions of both your primary landlord policy and the umbrella policy to avoid unpleasant surprises is essential.
- Loss of rental income: if your revenue property becomes uninhabitable due to a covered property structure damage, loss of rental income coverage will help reimburse you for the income lost during the repair or reconstruction period.
- Flooding coverage: even though Alberta experienced the last severe flood ten years ago, if you have an investment property in a flooding-prone area, adding flooding coverage to your policy might be a good idea.
How to Make the Best Use of Landlord Insurance
To best use your landlord insurance, you must understand its coverage and take proactive steps to manage risks effectively. Here are some tips on how to make the best use of landlord insurance:
- Get familiar with your policy: read and understand your landlord insurance policy’s terms, conditions, and coverage limits. Know what is covered and what is not, as well as any exclusions or limitations.
- Regularly review and update coverage: periodically review your insurance coverage, especially when there are changes to the property or its use. If you make significant upgrades or renovations, update your policy accordingly.
- Inspect and document your property’s condition: do move-in / move-out inspections every time you change tenants, including pictures and detailed descriptions. This can be helpful in the event of a claim and can serve as evidence of the property’s pre-existing condition. We explain how to perform inspections here.
- Screen tenants carefully: Implement a thorough tenant screening process to reduce the risk of potential issues. Good tenant selection can help mitigate risks and potential liability.
- Regularly maintain your property: property maintenance will address potential issues promptly. Timely maintenance can prevent minor problems from becoming more significant and expensive. We have an in-depth article to help you know the essential items to include in your maintenance schedule.
- Implement safety measures: take steps to enhance the safety of your property. This may include installing smoke detectors, fire extinguishers, and security systems. These measures not only improve safety but can also lower insurance premiums.
- Report claims promptly: if an incident occurs that is covered by your insurance policy, report the claim immediately to your insurance provider. Provide all necessary documentation and information to expedite the claim process.
- Communicate with your broker: maintain open communication with your insurance agent or broker. They can provide guidance, answer questions, and assist you in adjusting your coverage as needed. If you work with a property management company, they can also offer advice on making the most of your policy.
Protect Your Investment
Landlord insurance is a crucial tool to mitigate risk that provides the peace of mind of having financial protection in case of unexpected events or liabilities, making property ownership a more secure and less stressful venture.
However, insurance is not a substitute for good property management practices. By combining comprehensive insurance coverage with proactive property management, you can better protect your investment and minimize potential financial losses.
