No two insurance policies are exactly the same and when it comes to insurance on single or multi-family or commercial buildings for rental properties, its buyer beware.
1. Will this coverage provide full replacement cost on my building and contents in the event of a loss?
Coverage can be purchased for replacement cost (cost to rebuild) or actual cash value. If there is a loss and actual cash value is in place, depreciation will be applied to your claim and you will have to pay a portion of the cost to repair or rebuild.
2. Is the coverage all risk or named perils?
Even though All risk coverage does have exclusions however Named Perils only covers certain types of losses. Obviously, the All Risk option is the better form of cover.
3. Is damage caused by the tenant’s covered?
Many policies for rental properties will not cover damage caused by the tenants unless it’s a fire.
4. Will I recover my lost rental income in the event of a loss?
The reason you have rental property as an investment is two-fold. Hopefully, the property value increases over time. Secondly, you need the cash-flow to pay the mortgage, taxes etc. Make sure that you purchase rental income insurance to the full value of the annual rent!
5. What happens if my property is vacant?
All property insurance has a 30-day vacancy clause. If you don’t arrange with your insurer to add a vacancy permit, you will have no insurance.
6. Is there coverage for water damage?
Water damage is now the most common causes of loss in rental property. Anything from sewer back-up, overflow of water from a domestic appliance, frozen burst pipes or flooding. Make sure to find out what claims will and won’t be covered so you can plan accordingly.
7. How much do I have to pay in the event of a loss?
All policies carry deductibles, normally meant to encourage you to pay the smaller losses yourself. These deductibles can range from $500 up to in some cases $25,000 depending on your loss history and the type of loss.
8. Are there any special conditions I should know about if my rental is a condo unit?
Although the Condo Corporation does insure the building, you still have to cover the contents and liability. Also, be aware that the by-laws of your condo Corporation may require you to pay the deductible on any loss caused by the negligence of your tenant. Those deductibles can be anywhere from $2,500 to $50,000.
9. Are there any warranties in the policy?
So, what’s a warranty? It’s a promise to the insurance company that you will do something and if you don’t, your insurance won’t cover that loss. Let’s say your building is vacant. The insured has provided you with a permission for vacancy endorsement with a 72-hour Supervision Warranty. If you do not check the property as outlined in the warranty and you have a claim it won’t be covered.
10. Most importantly…. Should my tenants have their own insurance?
Absolutely! Ensure that your tenants to carry their own Tenants Package Policy! Ask them for either a copy of the policy or a certificate of insurance.
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For more information contact Heather heather@thinkinsure.ca or 587-597-5478
