Owning and operating apartment buildings and other rental properties can be a very lucrative business opportunity. Most people who do this find it fun and gratifying in different ways.
While there are a lot of benefits to owning apartment complexes and rental properties, there are risks associated with this. Many of these might not be your fault, like bad weather and natural disasters, but there are also risks to employees and tenants.
They can slip and fall, electrocute themselves, or injure themselves in several other ways that you could end up being liable for since you’re the property owner. Finding a landlord insurance policy that protects you from various incidents can help you minimize your risk when owning an apartment complex.
What Is Landlord Insurance?
Landlord insurance is similar to all other types of insurance because it’s there to protect you. Owning and operating an apartment complex or other property you’re renting to others comes with risks you’ll want protection from.
Depending on your chosen insurance policy, it can protect you from lost wages that you’d make if the property is inhabitable, weather damages, vandalism, employee misconduct, workers’ compensation claims, and more.
There are several other incidents that landlord insurance can protect you from. While you won’t experience any of these in a perfect world, having the insurance to back you just in case can give you peace of mind.
Why a Landlord Needs Landlord Insurance
According to Texas law, landlords don’t have to carry any insurance, but it doesn’t mean you shouldn’t consider it. Plus, if you have any real estate loan on your property, most of those lenders will require you to have insurance to take out the loan.
Whether your apartment complex is small or large, carrying landlord insurance is a wise business decision, and you can think of getting landlord insurance as an investment in your property.
Insurance is there to protect you as the landlord. Your property is an asset, and you should want to do everything in your power to protect it.
It can protect you from any lawsuits and insurance claims that residents, employees, or third-party individuals file against you and protect your stream of income in some cases.
You should get landlord insurance because owning property is an investment that isn’t cheap, so you should want to protect it and yourself.
While landlord insurance policies aren’t always cheap, when you compare that cost with the cost of a significant loss from property damage or another, they’re well worth it.
Accidents happen, and even if you take all the precautions to prevent them, they can still happen. If a resident or someone else on your property slips and falls or injures themselves in another way, you can face an insurance claim. Insurance is just a layer of protection for you and your property.
What Landlord Insurance Covers
When you’re looking into landlord insurance, different categories cover different aspects.
All of them are great options, and you’ll want to consider each one carefully before choosing the right policy. Here’s a look at the different categories and what those insurance policies cover.
Commercial General Liability Insurance
An insurance policy that you’ll want to consider getting if you’re a landlord in Texas is a commercial general liability insurance policy. These are significant policies that cover a range of events that can happen on your property.
They help protect you against lawsuits from employees, residents, and third-party individuals. Commercial general liability insurance can protect you from discrimination lawsuits, false advertising, wrongful termination, a resident getting injured in the pool, or even a delivery person slipping and falling on the property.
Commercial Property Coverage
Commercial property coverage is pretty standard for landlords. The policy covers a wide variety of incidents which is why it’s one of the most common for them to go with.
Something great about these policies is that they can even cover commercial property buildings that are still under construction in case accidents or claims are filed before the building opens.
These policies will cover the entire apartment complex, no matter how many buildings the complex has. It helps protect commercial property from natural disasters, weather damage, and human acts, whether on accident or purpose.
What falls under the insurance policy on the apartment complex property includes:
- All the apartment buildings
- Garages
- Pools
- Office space (for employees or a workspace for residents)
- Storage rooms/buildings
- Gyms
- Fences
These policies also help cover any business property that you have on the apartment complex property. Business property includes all maintenance equipment, office equipment, furniture, and more.
Loss of Income Coverage
Hopefully, you don’t need loss of income coverage, but it’s something you should consider getting. This type of landlord insurance will help compensate for any loss of wages in the event that your property is no longer inhabitable and, therefore, not making you money anymore.
What insurance companies will determine as inhabitable can vary, but usually, it’s because of damage to the property. The reasons the building is no longer habitable include fires, flooding, or other types of damage that make living in the building unsafe.
The insurance might not make up the entire amount of your lost wages from not being able to rent out the property, but it should be able to cover a substantial enough amount to keep you living comfortably.
What Landlord Insurance Doesn’t Cover
Unfortunately, there are several things that the above landlord insurance policy won’t cover for whatever reason. Flood insurance is a major one you might want to look into as a separate policy.
Flood insurance is considered a separate entity; you’ll need a different policy if you want flood coverage for your property.
Depending on where your property is in Texas, you might not find flood insurance as necessary. Still, if the property is in coastal areas or other areas that are prone to flooding, it’s definitely worth looking into.
Another thing landlord insurance doesn’t cover is excessive amounts of the coverage limit. You’ll want to evaluate what you’re at risk of the most and make sure your coverage covers those the most, and then you can add additional policies, like umbrella insurance, to cover less likely risks.
Each insurance agency has similar policies, but they might differ slightly. It’s best to assess each policy option thoroughly so that you can see what it does and doesn’t include so you can make the best decision as a landlord.
The Cost of Landlord Insurance in Texas
It’s difficult to pinpoint exactly how much landlord insurance will cost you in Texas. There are several factors that come into play that can determine how much your policy will cost you. Some of the factors that determine the cost of landlord insurance are:
- Where the property’s location is
- The condition of the property
- The property’s age
- The number of properties you’re looking to cover
- The type of property (multi-family, high-rise, duplex, etc.)
- Primary systems conditions (the HVAC, electrical, and plumbing systems)
- Fire alarms and prevention systems
- If there’s a swimming pool, gym, and other amenities on the property
Generally, if you have several properties of varying types in different locations, the risk is considered lower by insurance companies, so the cost might be lower. The best thing you can do to find out how much landlord insurance will cost is to reach out to insurance agencies and get quotes.
Additional Coverage Options To Consider
You’ll want to carefully look over your policy options before committing to one. When reviewing each policy, you’ll want to ensure you know exactly what it covers and to what extent. Not all policies cover everything; you might need to consider additional policies to help you feel fully covered.
You might want to think about some other coverage options because they’re not typically covered in the categories we mentioned earlier. There’s no law saying you have to have these policies, but as a professional and responsible landlord, they’re worth considering.
Workers’ Compensation
No one wants their employees to get hurt on the job, but it happens more often than you think in the United States. Having workers’ compensation coverage is necessary to protect you as the landlord in Texas.
Whether you have 100 employees or three, having workers’ compensation coverage is necessary. Employees can injure themselves at work quickly, especially maintenance employees, so if this happens, you’ll want to ensure you’re protected when they file a workers’ compensation claim.
Plus, holding workers’ compensation insurance is a way to show your employees you care about their safety. Yes, it’s there to protect you when they file a claim, but not having this can show that you’re not a responsible business owner, which can affect your business in more ways than one.
Boiler and Machinery
Boiler and machinery insurance doesn’t just cover the boiler, but all the aspects of the HVAC system, which you more than likely have in your apartment complex or other rental property.
This type of insurance covers things like the HVAC system, refrigerators, elevators, and other major appliances that can break at one point or another.
Anyone who’s ever had to repair or replace any machinery knows that it can be a costly venture. As the landlord, you’ll have more machinery in your complex than the traditional homeowner, so having a policy that covers these repairs can be a lifesaver.
Plus, when you have a policy that helps cover repairs, you can fix the problems quicker, preventing further accidents at your apartment complex or other rental property.
Commercial Auto Insurance
Commercial auto insurance is similar to a general car insurance policy. Just like that one protects you if you’re hit or hit someone, these are perfect for any commercial vehicles you have to help you run your property.
If you own an apartment complex with maintenance vehicles, whether cars, vans, or golf carts, you might want to consider getting commercial auto insurance. Hopefully, you don’t have to deal with any car accidents with a company vehicle or golf cart, but accidents happen all the time.
Accidents can happen, even in the slow speed limit areas of apartment complexes, and when this does, you’ll be happy you have that added layer of insurance protection.
Professional Liability Coverage
Holding professional liability insurance is a good idea for those with a larger apartment complex with several employees. Even if you have safe employees, accidents can happen even to the most experienced people, and having professional liability insurance can protect you if they have accidents on the job.
Commercial Umbrella Insurance
Commercial umbrella insurance is an umbrella policy that can help provide you with some peace of mind. These don’t come into play until you’ve reached your coverage limit with your other policy, but they’re great to have just in case more things happen, and you need further insurance coverage.
The Claims Process
The claims process is pretty much the same for landlord insurance as it is for car insurance or another type. Once something happens that your policy covers, you’ll get in touch with your insurance agent to file a claim.
Afterward, an insurance adjuster will evaluate the incident and damages that occurred, which made you file the claim. Throughout the process, they’ll come up with a fair payout that they’ll reduce depending on your insurance deductible.
The claims process is pretty much the same across the board, but your insurance agency might have specific policies and procedures that they follow. When you file a claim, your insurance adjuster will help you through the process and inform you about any other steps you might not be aware of.
Conclusion
Being a landlord can be a significant business venture, but it’s not without risks. Looking into getting landlord insurance is the best way to protect yourself from accidents and other events that can happen on your property.
The type of insurance policy you’ll need will depend on where your property is, the property’s condition, how many buildings there are, how many employees you have, and more. Since there’s a lot of variety in landlord insurance, the best thing you can do is talk to an insurance agent about your options to decide on the right policy for you.
Once you choose the policy that suits your needs best, be sure to keep everything up to date and modify your policy as things change to keep yourself safe as a landlord.
If you’re in the market for a quality insurance policy to protect yourself as a landlord, we’re here to help. We’ll ask a few questions about the property you own and then determine the right coverage plan for you. Give us a call today so we can get you a quote!