All Landlord Rental Property Insurance: Update June 21 -2009 All About "Landlords Rental Property Insurance" Information By Insurance Experts

Landlords rental property insurance is defined as a policy to cover a property owner from financial losses connected with their property which they let out. Mainly a landlord insurance policy will cover the building itself with the option of including the contents left within. It covers standard perils such as fire, lightning, explosion, earthquake, storm, flood, escape of water/oil, subsidence, theft and malicious damage. Each insurance policy is different and may or may not include all these items. Most companies will provide the option to have extra cover on top of what is considered the standard cover. These may include things such as accidental damage, legal protection, alternative accommodation costs or rent guarantee insurance.

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Rental Property Insurance is Market Value the Best Option For You

By Edward Groninger

There are two different ways that rental property owners can insure their rental properties. Each possesses its own challenges and rewards. In order for you to make a educated decision on your rental property insurance you need to know the pros and cons of both. Here we will discuss the Market Value Approach.

Market Value:

Or Actual Cash Value: Some insurance companies will allow you to insure your rental property with the market value, which is what you would sell it for on the open market. Actual Cash value is replacement cost minus depreciation. There are several computer programs available to find out this number and all insurance agents have access to them. The most popular one is by Marshall & Swift.

Pros:

The pro's to this is that you can purchase a older home in maybe a lower value area of town for a fraction of what it would cost to rebuild it today new. We all have those huge three course brick home with ornate wooden trim, hardwood floors that are no longer in the "in" section of town. The cost to rebuild such a home might be $500 -$600,000 thousand dollars, however the market value is only $125,000. Using the Market Value or Actual Cash Value lets you insure for a much lower cost, thus hoping for a much lower premium. The thought here is that if the home burns to the ground you would simple remove the debris, and sell the open lot and use the insurance money to buy or build someplace else.

Cons:

The cost savings on the insurance premiums for your Rental Property Insurance, normally is not worth the effort unless you get the market value to be at least 50% of the rebuilding cost. Otherwise the premium difference just isn't worth the downside. The biggest downside to this approach is a partial fire. Lets say the kitchen burns causing smoke damage and partial foundation damage to the house. Kitchens, especially to match a older old are very expensive, not to mention all the smoke and water damage. Now count in a little foundation problems or a larger fire walking up the walls and into the attic and now your stuck. You have a large protion of the building damaged and not enough insurance money to really fix it. Lets say the contractors cost are in the example above are $140,000, you insured it for $125,000. Now you have to pay the demolition cost to remove the entire building both good and bad, clean up and backfill the hole and you walk away with just the empty lot and $80-$90,000 dollars. However - here is the kicker, you still own the bank the $125,000. Your short. You either have to declare bankrupt if you incorporated or sell another asset to come up with the difference.

Bottom Line:

Beware of the Market Value type of policies for your Rental Property Insurance. The premium might be attractive but there are some serious downsides you need to consider. Talk it over with your agent. Have him give you a complete analysis of the pros and cons and now you can make a better informed decision.

If you are looking for Rental Property Insurance and its contents, look no further than a quality quote from Groningerinsurance.com. Your Pa Rental Property Insurance. We specialize in insurance for your rental property

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