Real estate investments offer plenty of benefits. They allow investors to build their wealth and provide homes for those who choose not to pursue homeownership on their own. When it comes to rental and investment property, too many owners fail to understand the need for protection in the form of dwelling property insurance in Colorado Springs.
What Is Dwelling Property Insurance?
Insurance plays a critical role in modern society. It provides the necessary protection against loss for automobiles, health, property, and life. Insurance may provide a small amount of money for children or other beneficiaries at the time of death. However, dwelling property insurance is a bit different, and many people are unfamiliar with the name.
Dwelling property insurance is a specially designed product that covers the structure of a property only – it does not protect the surrounding property, nor does it protect the contents of the structure. This sets it apart from conventional homeowner’s insurance, which covers the contents of a home and sometimes covers other structures on the same property.
Why Is Dwelling Property Insurance Important?
This type of insurance is important for safeguarding real estate investors’ assets. This is why it is also known as landlord protection insurance. Colorado Springs property investors require this protection to safeguard against damage from a wide range of “named perils,” including fire and storm damage.
Won’t the tenant’s renters insurance cover the investment property? No, it will not. Renters insurance is specially designed to cover just the contents of the property. Moreover, it only covers the contents that belong to the renter, so if things like the oven, stovetop, water heater, and other appliances are provided by a landlord, those items will not be covered by the renter’s insurance policy.
How Does Landlord Protection Insurance in Colorado Springs Differ from Homeowners Insurance?
Landlord protection insurance and homeowners insurance are similar, but they are not the same. Both will cover the structure itself, but homeowners insurance covers the contents of the home, as well as other things like the garage, as mentioned previously. However, there are other critical differences to understand here.
One key consideration with dwelling property insurance in Colorado Springs versus homeowners insurance is liability coverage. Dwelling property insurance does not cover the property owner’s liability in the event that someone is injured on the property or their property is damaged during a visit to the property. Securing this coverage requires an additional rider. On the other hand, homeowners insurance does cover liability in these instances.
Do landlords require liability insurance on rental properties? Yes, they do. Standard property dwelling insurance policies may not offer liability protection, but policies designed specifically for landlords may include this coverage (landlord protection insurance for Colorado Springs real estate investors). Landlords should work with their insurance agent to understand their needs in terms of liability coverage and find a policy that offers that.
As mentioned, homeowners insurance covers other structures on the property, such as garages and sheds. Dwelling property insurance usually does not – it applies only to the primary structure. What should landlords do? Considering that many investment properties in and around Colorado Springs include additional structures, finding coverage for those structures is important.
Landlord protection insurance offers the additional coverage necessary. However, landlords may also be able to purchase a separate rider and add it to their dwelling property insurance, although this may actually cost more than buying landlord-specific coverage. Again, working with an experienced insurance agent can help ensure that landlords find the right level and type of protection for their unique needs.
Most rental properties come furnished with essential appliances renters will need, such as an oven, a furnace, and a water heater. However, those appliances belong to the landlord, not to the renter, so what coverage is offered here? In most cases, dwelling coverage will also cover specific, landlord-owned appliances, while it will not cover other contents of the dwelling. With that being said, this may not be true of all dwelling property policies. Landlords should verify with their insurance agent which appliances and other contents are covered and which are not.
Loss of Rental Income
Landlords depend on their investment properties to generate income. Without that stream of income, they may face challenges in meeting their financial obligations. Dwelling property insurance in Colorado Springs may not cover loss of rental income. Landlords should verify with their insurance agent whether rent loss insurance is included with their policy. In some cases, it will need to be added as a rider, even with specific landlord protection insurance policies.
Building Code Coverage
Landlords are required to ensure that their rental properties are up to code. However, codes change over time, and it can be challenging to keep up with the changes. The challenge here is that if a property is damaged and is not within the current building code, it will need to be updated before it can be rented out once more. That can be costly. Landlords should consider building code coverage for their properties, which is usually only available as an optional rider.
Non-Occupied Dwelling Endorsement
What happens if a property is damaged when it is not occupied by a renter? In some cases, dwelling property insurance and even more specific landlord protection insurance may not provide any coverage, particularly if the property has been vacant for 30 days or longer. A non-occupied dwelling endorsement provides peace of mind for landlords so that if damage occurs when the property is vacant, they will be covered.
Choosing the Right Insurance
Dwelling property insurance for Colorado Springs real estate investors is an important consideration. However, it may not offer all the protection needed. Real estate investors should work with their insurance agent to determine exactly what coverage is included and then work to customize their landlord protection insurance to their budget, needs, and situation.