When you own rental property in New Orleans you need to protect your investment with a rental property insurance policy that includes Liability and Property damage so you are not left paying claims out of your pocket
Topics discussed in the article below
How much should I insure my rental property?
What kind of insurance do I need for my rental property?
How much does is cost to insure rental property in New Orleans?
What is Landlord insurance?
How can I lower my insurance on rental property?
Why is rental property insurance so expensive?
Does insurance protect me from my tenant’s causing damage?
Does my homeowners insurance policy cover rental property?
How do I calculate loss of rent coverage?
Does rental property insurance cover flood?
Is a busted pipe covered by flood insurance?
Can I get one insurance policy for all my rental properties?
How much should I insure my rental property?
You want to determine the estimated square footage of your property and contact a local contractor and ask what is the estimate cost to rebuild price per square foot?
This figure will usually be “$100 per square foot” or “$150 per square foot”
This figure is based on the cost of building materials and the cost can fluctuate
Here is an example…if you own a 2200 square foot property and the cost to rebuild is $140 per sq ft the estimate replacement cost of your property would be (2200 x 140 = 308,000)
You should obtain a rental property insurance policy in the amount of 308,000 because that is the estimated cost to rebuild your property if a total loss
You can’t under insure your property and you can’t insure half a house
We do have an insurance company that will allow you to insure your property as low as $70 a square foot and still get replacement cost
In the example above (2200 x 70 = 154,000)
What kind of insurance do I need for my rental property?
There are two types of rental property insurance policies you can purchase.
An insurance policy on a Dwelling form or a Commercial form policy
Depending on the property details may determine which policy is best for you
You want your rental property insurance policy to include Replacement Cost, Loss of Rental Income and Liability
Replacement Cost is the cost to you to repair/replace your property with no deduction for depreciation
Loss of Rental Income includes the loss of income from rent if you lose your tenant due to a claim and are unable to lease your property during the repair or rebuild of your property
Liability is either premises liability or general liability that provides liability for bodily injury or property damage payments to others in which you are legally liable for in the event of a claim
Premises Liability only provides liability at the designated location of the property address
General Liability includes premises liability but also provides liability protection from other claims brought against you such as invasion of privacy, wrongful eviction and provides a legal defense of all claims brought against you with or without merit
How much does is cost to insure rental property in New Orleans?
The cost of rental property insurance will be based on the property details such as, but not limited to, construction type, size of the property, cost to rebuild, past claims history, property location such as zip code, year of updates to roof, electrical, plumbing, hvac, deductible selection, coverage options such as water backup, service line, premises liability or general liability option, selection of liability limit and others
What is Landlord insurance?
The term Landlord can be used by tenants but most insurance companies no longer refer to rental property insurance as “Landlord insurance”
The term “Landlord” is another term for rental property owner or investor that is the owner of property but does not live or reside at the property location.
A tenant will pay the property owner or investor rent to occupy the property
Landlord insurance policies can be referred to as Rental Dwelling policies or Commercial Lessor Risk policies
How can I lower my insurance on rental property?
Rental property insurance rates can go up depending on the insurance company that provides the insurance coverage
If the insurance company sustained too many claims on their rental property book of business they can raise rates and you can either pay the renewal or move to a new insurance company
You never want to lower the insured value on the policy because with the rising cost of building materials you don’t want to have rebuild your property out of your pocket because you didn’t get enough money from the insurance company
You should consider a transfer of risk to you which is basically taking a higher deductible (the amount the insurance company deducts from the claim check)
Going from a 1000 deductible to a 2500 deductible could save you up to $500 a year
If you are not someone that uses an insurance policy as a home warranty or maintenance policy (you shouldn’t) you may want to increase your All Other Perils deductible which is any claim that is not a Named Storm or Hurricane
Why is rental property insurance so expensive?
One reason is because you the owner are not living in the property.
The insurance company would expect a property owner that resides at their property to take more care of and maintain the property
A tenant on the other hand would probably not tell you, the owner of the property, maybe about a slow water leak in the bathroom or damage that may need attention but the tenant may decide its not worth their time
Another reason is the liability exposure is greater because one of the most common claims is a slip, trip and fall from the tenant or from the tenant’s friend with or without merit the claim is still going to be filed and the tenant is going to attempt to recover medical bills and pain and suffering from you
Does insurance protect me from my tenant’s causing damage?
No your insurance policy is not going to provide property damage coverage for intentional damage although the policy would cover vandalism
Intentional damage is often excluded in most insurance policies so the best practice here is to make sure you do two things:
Get a Security Deposit
This will help provide damage repair once your tenant evacuates the property
Most security deposits are not enough if the tenant decides to either destroy your property or just failed to maintain your rental property with any care or concern for issues that probably needed your attention
Require your tenant to purchase a tenant insurance policy (HO-4)
This should be included in the lease
This policy can usually be purchased from their car insurance company for as low as $150 a year
Get a copy of their proof of insurance (declarations page or “dec page”) and contact the insurance company to add you as an additional interest because you are the property owner
This is important because if the tenant’s policy cancels you will be notified in writing
Does my homeowners insurance policy cover rental property?
I have had some customers tell me their home insurance policy covers their rental properties
This statement is incorrect
Your homeowners insurance policy would not provide property coverage to other properties you own but it could extend liability to other properties you own
If you only want liability insurance it is possible but not likely your insurance company will allow you to list the locations of rental properties on your home insurance policy
I don’t recommend this because some home insurance policies only have 100,000 of liability and that is not enough protection in the event of a liability claim
How do I calculate loss of rent coverage?
You would want to determine the monthly rental income and multiply it by 12 to determine the total amount of rental income coverage you need on your rental property insurance policy
Some commercial lessor risk policies will limit the amount they pay to only 3,6,9 or 12 months and it is not automatically included on the policy so you would need to add this coverage
If you have a rental property on a commercial policy form you need to check your policy for “Business Income” and what is the limit allowed
Don’t assume you have loss of rental income on your policy
Does rental property insurance cover flood?
It is the same as any property insurance policy and the answer is NO
You can purchase a National Flood Insurance Program (NFIP) policy through FEMA or new options are available now to Rental Property Investors such as Private Flood Insurance
I do recommend Private Flood Insurance when a rental property is located in a preferred flood zone and it is not lender required because the private flood insurance policy would not have the $250 non owner occupied surcharge and some private flood insurance companies provide loss of rental income in the event of a flood
A FEMA flood insurance policy does not provide any loss of use or loss of rental income
Is a busted pipe covered by flood insurance?
Water damage is covered by your rental property insurance policy such as busted pipes, water intrusion and in some policies water backup from sewers or drains
But rising water from outside the property would not be covered under a rental property insurance policy but only covered by a purchase of a flood insurance policy
Can I get one insurance policy for all my rental properties?
Yes it is called a scheduled insurance policy
You are allowed to purchase one insurance policy and you can add other properties you own to the insurance policy
The benefit is for all your rental properties you would have one insurance renewal bill so you could budget for insurance and only have to pay once a year for your insurance protection
I know many real estate investors prefer the one insurance bill because if they own multiple properties sometimes they have a different insurance company on each property and a different renewal bill for each location
One insurance policy can simplify a real estate investors management of their insurance protection

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