Insurance can be a tricky topic–especially for rental property owners. After all, you have to decide what type of insurance is best for your real estate investment. With several options to consider, it can quickly become confusing. Today, we’ll discuss umbrella insurance, what it covers, and how it can benefit landlords.
Contents of This Article:
- What Is Umbrella Insurance for a Rental Property?
- What Does an Umbrella Policy Cover?
- How to Get Umbrella Insurance for Your Rental
- How Much Does an Umbrella Policy Cost?
- Benefits of Umbrella Insurance for Landlords
- Protect Your Rentals With Professional Management
What Is Umbrella Insurance for a Rental Property?
Umbrella insurance for a rental property is a type of liability insurance that provides additional coverage beyond the limits of your standard landlord insurance policy. As the name suggests, you can think of it as an umbrella that covers your existing policy, providing broader coverage and higher limits to protect your assets in the event of a costly lawsuit or other event.
The extra coverage from an umbrella policy is useful when a lawsuit is brought against you as the property owner for incidents on your rental property, such as if someone is injured on the premises. If the damages awarded in a lawsuit exceed the limits of your landlord policy, umbrella insurance can cover the remaining costs up to the policy limit.
It’s important for landlords and rental property management companies in Northern Virginia to know what umbrella insurance covers and what it doesn’t. For instance, an umbrella policy doesn’t typically cover property damage or losses; it’s primarily for liability protection. As such, landlords usually add umbrella policies to protect their assets and themselves from potentially costly legal liabilities.
What Does an Umbrella Policy Cover?
Umbrella insurance for landlords typically covers liability-related expenses exceeding the limits of their standard policy. Here are some common scenarios where umbrella insurance may provide coverage.
- Personal Injury Claims- If a third party suffers an injury on your property and sues you for damages beyond what your landlord insurance policy covers, umbrella insurance can help cover the remaining costs.
- Property Damage Claims- If your property or tenant living in the property causes damage to a third party’s property and you’re found liable, umbrella insurance can help cover the costs.
- Legal Fees- Legal fees from landlord-tenant issues can add up even if you’re not at fault. An umbrella policy can help cover some of these costs that aren’t covered by other forms of insurance.
- Libel and Slander- If a tenant accuses you of libel or slander, an umbrella policy may cover legal defense costs and damages awarded in a lawsuit.
What Doesn’t It Cover?
While an umbrella policy provides broad coverage for many liability claims, it doesn’t cover every type of risk. As such, there are certain exclusions and limitations to be aware of. Here are some common examples of what umbrella insurance typically doesn’t cover.
- Damage to the Property- Umbrella insurance typically does not cover damage to your rental property. Instead, this is covered by your primary landlord insurance policy, which covers fires, theft, vandalism, and natural disasters.
- Intentional Acts- Umbrella insurance usually doesn’t cover damage or injuries intentionally caused by the landlord or property management company.
- Business Activities- An umbrella policy may not cover business activities. For instance, if a rental property is owned under an LLC, the landlord would need a separate policy.
How to Get Umbrella Insurance for Your Rental
If you’re thinking about using umbrella insurance to protect your rental properties, here are some of the steps you’ll want to take.
- Look at Your Existing Liability Coverage- Determine if your current policy provides enough coverage for potential risks. Then, you can decide whether or not you need extra coverage.
- Decide How Much Coverage You Need- Consider your rental property’s value, your assets, and any potential risks associated with your properties. This can help you determine how much coverage you need.
- Shop Around for Providers- Look at different insurance companies that offer umbrella policies to see which suits your situation best. Get quotes from several providers and ask any questions you may have.
How Much Does an Umbrella Policy Cost?
The cost of an umbrella policy for landlords can vary depending on several factors. First, you have to look at your needs as a landlord, the type of properties you own, where they’re located, and how much they’re worth. Additionally, you’ll want to evaluate the potential risk associated with the properties.
Luckily, umbrella policies are relatively affordable since they only provide coverage after all underlying policies have reached their limit. According to the Insurance Information Institute, a $1 million umbrella policy costs between $150 and $500 per year. That said, landlords should shop around and compare quotes from different insurance providers to find the best coverage at the best price.
Benefits of Umbrella Insurance for Landlords
Umbrella insurance can provide several benefits to landlords, including the following.
- Increased Liability Protection- One primary benefit is that it provides additional liability coverage beyond what your typical landlord insurance policy covers. This gives landlords extra protection in case of expensive claims or lawsuits.
- Protection Against Lawsuits- Landlords risk being sued for various reasons, such as tenant injuries, property damage, or allegations of negligence. An umbrella policy can help cover legal expenses, reducing the financial impact on landlords.
- Peace of Mind- Knowing that you have an umbrella policy to fall back on can help give you peace of mind as a landlord. It provides reliable coverage that can cover you when your primary policy is up, ensuring you and your property are protected.
Protect Your Rentals With Professional Management
Protecting yourself and your rental properties is one of the most important aspects of running a rental business. One of the best ways to fully protect your assets is to explore the benefits of an umbrella policy. Knowing what coverage you have and what you still need can help you make the best decisions for your rental business.
Need More Advice? contact us today!
Another surefire way to protect your assets is to hire professional property management. A reliable company like Bay Property Management Group can help protect your best interests as a landlord. We provide comprehensive services, including rental marketing, tenant screening, rent collection, maintenance, and more. Contact BMG today to learn more about our services throughout Baltimore, Philadelphia, Northern Virginia, and Washington, DC.
