You could probably write a book on what is NOT covered on your policy
Owner Tid-Bits
Rule #1 for owners/landlords:
If you are making your current mortgage payment with your tenants current rent payment each month and have no savings to draw from if you cannot collect rent, then you better have coverage for vacancy loss. When a storm hits an area, insurance companies, contractors and vendors are backlogged. This means that your home may be unlivable for weeks before work can even BEGIN. Insurance companies will be expecting estimates on necessary work and will be delaying your rebuild until they LIKE the estimates that contractors are providing. It is NEVER a smooth process for work to be approved – never, never, never. During a disaster, that is only amplified due to the number of customers needing work approved at the exact same time. You are lucky to even get to talk to your adjuster, let alone get approval on estimates so that work can begin.
If your home is unlivable, you are likely going to be responsible for your tenant’s alternate housing needs or a refund of their rent that they cannot live in their home. There is an extremely small number of tenants that spring for the alternate housing coverage and that is because they assume the owner will be responsible for their every expense during a disaster.
Rule #2 for owners/landlords:
Buy flood insurance even if your home is not in a flood zone. Many homes that are not in flood zones can flood. I’ve read that 20% of flood claims are from homes not in flood zones. Remember also, flood zones get updated from time-to-time. This is because areas that didn’t flood before become flood zones. FYI, I’ve noticed that mold resulting from water intrusion is becoming less-and-less likely to be covered every year.
Rule #3 for owners/landlords:
Buy flood insurance even if your home is not in a flood zone. No that is not a typo, see above for more details.
Rule #4 for owners/landlords:
Know your coverage BEFORE a disaster. You will not be able to change your coverage when storms are imminent. Do you have wind/storm coverage? Do you have sewage line protection? You may be one flush away from a nasty disaster and TRUST ME, raw sewage is a SUPER-BIG deal to your tenant. Please know that I know as much about insurance law and your personal coverage as I know about the mating habits of albino porcupines in tropical climates in December during a lunar eclipse.
Rule #5 for owners/landlords:
Don’t expect that your property manager is going to handle your entire claim while you sip sweet tea in another state. Property managers may be open to handling some aspects of your insurance claim, but not all. It’s just not possible.
Claims are complex and poorly constructed processes managed in many cases by the most dedicated employees on the planet aside from the DMV – yes that is sarcasm. If you talk to 5 employees at your insurance company, you WILL likely get 5 different answers. If your insurance is awful and your carrier disreputable, managers cannot argue coverages on your behalf. Expect to have a good amount of responsibility in coordinating work at the home.
Property managers that are able to handle your claim from start to finish are likely to charge a rate commensurable with the complexity of your claim and the increased workload endured, especially if your carrier is being difficult, and they are ALL difficult. Denial of any portion of a claim will always fall to the owner to dispute.
Rule #6 for owners/landlords:
Know what “depreciation” means in relation to your insurance coverage and how it is used to determine the value of your things in the event replacement items are needed. You might be shocked at what your stuff is worth to your insurance company.
Rule #7 for owners/landlords:
If work is done at your home and your insurance carrier refuses payment to the contractor, you will be responsible for any portion that is owed to the vendor. Property managers have to pay vendors for work at your home, and they will use your rental proceeds if necessary to settle balances owed for work at your home. If vendors require any portion up front, owners must pay those costs and wait (hope) for reimbursement. Property managers are NEVER expected to front any money to any source on your behalf. We ain’t falling for that old trick!!
Tenants Tid-Bits
Rule #1 for tenants:
Your personal belongings are not covered by the owner’s insurance policy. Ever. If you need to stay in a hotel, you should probably have alternate housing coverage or a friend that doesn’t mind you on their couch. If the owner does pay your hotel stay, it may be a reimbursement payment to you and not done at your check-in.
Rule #2 for tenants:
An owner’s insurance is unlikely to cover your moving expenses and you may have to move if work at the home is going to be so invasive that you cannot safely occupy the home during the construction process. If you can’t afford to move in the event of a disaster, you should check what coverage options you can add to your policy to compensate for lack of disaster savings. Renter’s insurance is incredibly affordable, so there is no excuse not to have a Cadillac policy if you don’t have savings.
Rule #3 for tenants:
Ask your carrier for deductible details. Can you afford to pay your deductible in the event of an emergency? Sometimes there are multiple deductibles. Can you afford to pay the deductible in addition to moving expenses? How about meals? If the kitchen is demolished, you may have to eat out. You can increase your insurance coverage to compensate for lack of savings to cover unexpected costs. Owners are not required to pay those types of things and are likely suffering financial hardship with the things that they are responsible for. It’s everyone’s job to be prepared for disasters.
Rule #4 for tenants:
Know your coverage BEFORE a disaster. You will not be able to change your coverage when storms are imminent.
Rule #5 for tenants:
Don’t expect that your property manager is going to handle your claim while you sip sweet tea at a nearby resort. Property managers are paid by and work for the owner of the home. They are unlikely to be able to handle any portion of your claim, but will be able to provide information to your provider on the status of the home and property damage to assist them in helping you. Keep in mind they may have lots of tenants with property damage if the cause of the claim was a natural disaster that affected many homes in your area.
Rule #6 for tenants:
Know what “depreciation” means in relation to insurance coverage and how it is used to determine the value of your things in the event replacement items are needed. You might be shocked at what your stuff is worth to your insurance company.
Rule #7 for tenants:
Have savings on hand for expenses that you may incur during a disaster, like housing, hotel, moving expenses and food. Property managers are NEVER expected to front any money to any source on your behalf. If you are to be reimbursed by your insurer, it will fall to you to pay things up front and wait for payment. No one can do that for you. Remember, you are likely one of many tenants asking for assistance at the same time. You can ask for a landlord/owner to reimburse you for expenses and it may be granted, but aside from gross negligence, it is unlikely that a homeowner is responsible for the disaster and therefore can’t be expected to pay your way in addition to their own expenses which are likely to be much more astronomical than tenant expenses.
Rule #8 for tenants:
If you have pets, have a plan for where they will stay or how they will be affected by a home that is unlivable. I have no clue what tenants/landlords are responsible for with pets in the event of a natural disaster and displacement coverage on each home that we manage. And I have 3 dogs at my house, so I can’t watch yours too!!! Good pet owners will have a plan in place for their pet’s care in the event of any sticky situation.
Mary – PROperty Manager for Stephanie Clark Property Management
Tags: Insurance, Investment Insurance, Landlord Insurance, Renters' Insurance, Tenant