The commercial rental business is booming. With more than 500,000 apartment rental businesses in the U.S. alone, the increasing difficulties associated with purchasing a home are leading to more Americans renting instead of buying. Landlords need to consider habitational insurance in order to protect themselves against liability and their properties against some of the most common named perils. Prior to deciding on the right policy for your business, it is important to understand what habitational insurance is and why all landlords should hold a policy.
What Is Habitational Insurance?
Habitational insurance is a special type of commercial rental insurance aimed at landlords. There are a variety of coverage options, but its primary usage is to offer liability and disaster coverage.
Liability coverage offers protection for landlords in the event a tenant experiences an injury on their property. It also covers any losses caused by fire, theft, wind, storms and tenant vandalism/malicious damage. All landlords are strongly recommended to take out insurance. It provides more coverage than ordinary property insurance policies and is especially useful for multi-tenant dwellings, such as student dormitories, apartment blocks and hotels.
Things You Should Know About Habitational Insurance
Every client wants to get the best deal on their habitational insurance. At the same time, most insurers advise against taking out the cheapest available policy as this may lead to gaps in coverage. Ensuring a commercial rental business and its assets are fully protected ensures the protection of your initial investment and future profits from any disaster that may occur.
Property Management And Security Can Be A Factor
Most landlords will offer some sort of security to protect their tenants. Onsite security is commonplace, but whether they are armed or not can have a tremendous impact on habitational insurance rates. Although insurers always consider a client to be a lower risk when they have onsite security, clients who use their own employees are considered to be a higher risk than third-party security agents. Furthermore, while employing armed security agents may be considered a reason to receive lower insurance premiums, insurers typically see armed security agents as having more exposure, thus armed security can increase insurance premiums.
Landlords managing more than one property together with multiple property management companies must have a separate policy for all locations for contingent liability purposes. This is where taking out habitational insurance becomes complicated. Landlords attempting to obtain cover for multiple properties are advised to speak to an insurer specializing in commercial property for further guidance.
Renter Demographic Can Also Have an Effect
Different renter demographics present different risks, from the point of view of insurers. For example, an assisted living complex carries its own risks because there are over 15,000 slip and fall incidents per year, which is estimated to cost insurers over $34 billion per year. On the other hand, student dormitories come with an increased risk of tenant damage. Plus, 25% of all crimes reported by U.S. college students are sexual assaults.
Approximately 30% of all crimes in student housing are covered under conventional habitational insurance policies. What all this means is that the risk of the demographic impact. Certain demographics come with an increased likelihood of a claim being made, statistically, and insurance providers must account for that by adjusting their monthly premiums.
Make Sure the Livability Standard Is High
Habitational insurance does not absolve a landlord of their responsibilities. Landlords are required to ensure their properties are in a safe and habitable condition. What this means is if a client is injured as a result of neglect, the landlord will need to pay the resulting costs, rather than their insurance provider. For example, if a rusty nail is left sticking out of a floorboard and the tenant has repeatedly asked for it to be fixed, an injury involving that rusty nail would mean the landlord has to pay any costs out-of-pocket, not the insurer.
Location Of The Property Is Important
Since habitational insurance covers property damage, insurers will determine their premiums for a specific client based on the area the property is located in. For insurers, the determining factor is the crime score for the area. If the general crime score is higher in an area, the insurer has more exposure, so there is a higher likelihood of a claim being made.
This applies no matter how much security a commercial rental property has or how well it scores in other areas of risk. However, this should not act as a deterrent for landlords in high crime areas. Paying more for habitational insurance can prevent major financial losses later.
Get Habitational Insurance From The Pros
Habitational insurance is something any commercial rental property investor must have. Anything can happen and you need to know you are fully covered. However, insurance is highly sensitive when it comes to pricing. Get the guidance you need from Merchant Family Agency. You will be able to find out which factors impact your monthly premiums and the actions you can take to get the most affordable policy available to you. Contact the habitational insurance experts at Merchant Family Agency and protect your investment.