We just had an interesting situation with one of our clients. They had purchased insurance coverage for a rental property here in Texas just east of Dallas. When we were asked to offer a quote for the policy, the first thing we noticed is that the policy was for homeowner’s insurance. That is not good.
What is wrong with Homeowner’s Insurance?
Well there really isn’t anything intrinsically wrong with Homeowner’s insurance. We write homeowner’s insurance for clients all the time. The issue is that home owner policies require that the home owner live in the house.
So if you have a rental property that used to be your house and you have now rented it out, you need to update your policy.
You don’t want to give the insurance company a reason to NOT pay you if there is a claim on your property.
To an insurance company having homeowner’s coverage on a rental property, in Texas or anywhere, is about like having boat insurance on your car.
Does Landlord Insurance offer different coverage?
Landlord insurance is often referred to as “dwelling/fire” insurance. That is because basically the insurance is covering your dwelling, or the home itself.
You can see in the coverage page above that there is about $124,500 of coverage for personal property on this $166,000 home. What personal property can a person have in a home that is worth that much? When I think about selling all of the stuff inside my home at a garage sale or on Craigslist, I think we would be lucky to get $20,000 to $30,000 for all of it.
This person was paying for a bunch of coverage that they didn’t really need and they couldn’t even use.
Isn’t Homeowner’s Insurance cheaper than Landlord Insurance?
This is a very common myth out there. Maybe we can get Mythbusters to do an episode on this, or maybe David and I can do a “Insurance Bros.” show on HGTV that would be REALLY fascinating covering all of the ends and outs and excitement of Texas Landlord Insurance.
While coverage on the house IS typically less expensive with a home owner’s policy compared to a landlord or investor insurance policy, once you add in coverage for personal property on a homeowner policy, you really come out about the same.
The landlord insurance is usually about the same cost and can sometimes even be less expensive than homeowner coverage.
So what did we do for a quote on Landlord Insurance for this client?
Since we are independent insurance agents, we have the opportunity to compare prices with many different companies. We have a few who we have worked with in the past and have been good at taking care of our clients’ claims and give us good prices on good coverage so we took at look at them.
One of them, a company that has been around for years gave us a quote that was about $800 less per year in premiums, and about $3000 less on deductibles, and we got their liability coverage up from just $100,000 to our recommended amount of $500,000.
We added in water and sump coverage for $10,000, added in coverage to provide fair rental income coverage, and bumped up their medical payments to someone who gets hurt on their property from $1000 to $5000 and we were pretty happy about the quote.
Take a look at the difference in these two coverages below:
This may be different than your policy, but this is what we were able to do for this client.
When I spoke to this client who is an out-of-state investor, they were pretty excited to get their premiums better with much better coverage.
If you would like a quote just to see what your rental insurance coverage in Texas could be, take 5 minutes and fill out the form below: