What’s the Difference Between NC Rental Property and Landlord Package Insurance?
You may be asking yourself “is there a difference between a NC Rental Property Insurance Policy and a NC Landlord Package Insurance Policy?” The answer is simple… YES and NO! A NC Rental Property Insurance Policy and a NC Landlord Package Insurance Policy are similar in that both cover “property” that is owned by one party and leased or rented to another party. The differences are in the type of “Business Entity” the property is owned under as well as the type of property that is covered.
NC RENTAL PROPERTY INSURANCE
NC Rental Property Insurance is used to insure residential rental property owned in the name of an INDIVIDUAL. Over the recent years, more and more people have purchased homes or properties that are rented or leased to individuals or families. While Insurance Carriers have different definitions of “Rental Property”, most carriers will allow and individual to insure residences held for lease or rent as Rental Property as long as the unit(s) is 4 families or less. The actual insurance form(s) that are used with NC Rental Property Insurance are called Dwelling Fire Policies. There are three main types of Dwelling Fire Forms, DP-1, DP-2, and DP-3. Consult you Insurance Advisor as to which Form your property qualifies for.
NC LANDLORD PACKAGE INSURANCE
NC Landlord Package Insurance is used to insure residential rental property as well as commercial rental property owned in the name of a Business Entity (Corporation, LLC, Trust, etc) or Individual. NC Landlord Package Policies are used to insure any type of property held for lease or rent. The property could be a single family residence, commercial building, or an apartment complex. The NC Landlord Package offers a much better coverage form as this is considered a “Commercial Package Policy” vs the NC Rental Property Insurance form which is a “Personal Property Insurance Policy”.
Regardless of which policy type is right for your particular situation (NC Landlord Package Insurance or NC Rental Property Insurance), the primary coverage is the Building Coverage. You are financially invested in your property and need to protect yourself from that property being damaged. There are several issues that need to be considered when insuring your property:
- Insurance To Value – As with every other type of Property Coverage (Commercial or Personal), Insurance Carriers require that you insure your property to 100% of the properties Replacement Cost.
- Deductible – The deductible is the amount that you will pay first in the event of a loss
- Construction – The better the construction (example: steel construction vs. wood construction) the lower the premium will be.
- Age – The newer the property, the lower the premium will be.
People and/or businesses that own property for lease or rent have an enormous exposure to lawsuits. Someone could trip and fall on your property and sue you for their injuries! There is a big difference between NC Landlord Package Policies and NC Rental Property Insurance Policies with regard to covering liability exposures. The NC Landlord Package Policy has both Property and Liability Coverages included (the policy “packages” both Property and Liability Coverage into one policy). NC Rental Property Insurance, on the other hand may, or may not, offer liability coverages.
If your NC Rental Property Insurance Carrier does not offer liability coverage on the policy, how do you protect yourself from liability? There are two ways to accomplish this. First (and most common), is to “Endorse” your Homeowners Insurance Policy to extend the liability protections to your NC Rental Property. The second way is to purchase a Personal Liability Policy. This method of obtaining Liability Protection is rarely used or offered today.
Starting in the late 1990’s and extended in to the 2000’s, many people and businesses have looked to real estate as a safer investment alternative to the Stock Market. As such, there has been an influx of people with little or no experience in managing Rental Property. With an increase in the amount of rental property coupled with a new set of “landlord’s” with little or no experience, insurance carriers have experienced high losses in the NC Landlord Package Insurance and NC Rental Property Insurance policies. In order to curb the amount of losses in these types of policies, Insurance Carriers have tightened the underwriting guidelines for these policies. Increased scrutiny is used with regard to the age of properties, the construction of properties, and the loss experience of the property owner.
ALLCHOICE Insurance specializes in the in insuring Rental Properties. Our Advisors will mentor and advise property owners in the appropriate deductible to choose for you policy, Risk Management Procedures, and when to file a claim or pay for the loss out of pocket. The last thing a Property Owner wants is to have their policy(ies) cancelled by the Insurance Carrier.