Insurance: Important Key to Providing Peace of Mind for Landlords

Written by Posted On Sunday, 26 August 2007 17:00

It is a sign of the times: Terrorist insurance for your rental properties. While you may or may not find this type of coverage necessary, protecting yourself and your property should be top of mind.

"All apartment owners/managers need to carry insurance to protect their buildings and to protect their own personal assets as well as to make certain that they have a good risk-management program in place," says Tom Bannon, CEO, California Apartment Association (CAA).

The CAA is the nation's largest statewide rental property association. It consists of 19 local affiliates throughout California representing more than 50,000 rental property owners, management professionals, and apartment builders who operate 2 million rental housing units statewide. The topic of insurance is so important to the CAA’s members that the association has launched a first-time-ever member benefit program to help its members protect their assets.

"We will offer a wide array of insurance products. One is Workers’ Compensation which is necessary for all apartment owners who have employees, even if they have a part-time employee or if they have hundreds of employees, all employers in California are required to cover their employees with the Workers’ Comp policy," explains Bannon.

The goal: to help protect and create peace of mind. That’s why the association is introducing the CAA Value Insurance PlanTM. It includes special pricing for CAA members as well as discounts for members with low-loss history.

"We are offering property and casualty insurance to our members and that basically insures their building against a loss," says Bannon. He adds that the policy covers not only damage to a property but also if someone were to become injured on the property.

Bannon says a critical concern when insuring your rental property is making certain that you have adequate coverage that will cover current code requirements. Reconstruction is more costly than new construction. Be sure to consider the expense involved with demolition, availability and cost of materials, labor, and current code requirements. Policies can be established to cover these factors.

"If you had any sort of loss or damage to your building, you would definitely want to make sure that you had adequate coverage to put the building back into the current code status," says Bannon.

Typically, there are two ways property is insured: Special Cause of Loss (Open Perils) and Specified (Named Perils). It’s important to understand the difference as they can result in you, the landlord, wishing you had one type over the other should something go awry with your rental.

Named Perils offers less protection and excludes certain things from the coverage. It also requires the actual cause of loss to be listed in the policy in order for the insurance to cover it. However, Open Perils offers expanded coverage. It covers all causes of loss that are not specifically excluded in the policy. Common exclusions might be: flood, earthquake, acts of terrorism, war, and nuclear incidents. But you can choose to purchase coverage for those items that are typically excluded such as fire, lighting, or theft.

"If you’ve got a larger building you want to make sure that you have some coverage for the rent that you may lose in the event that the unit can no longer be rented out. You would want to make certain that you have adequate coverage so that you could help place your residents if they had no place to go to," says Bannon.

"Insurance for your rental is as important as determining if a property makes good business sense to purchase. But Bannon says some landlords don’t give it enough consideration until it’s too late.

"Owning property in the state of California today is not a part-time job," says Bannon.

Understanding that things can and will go wrong with your rentals will likely encourage you to review your insurance coverage for your asset.

It’s just a very complex business today. It’s not like owning stock where you just get a dividend; those days are no longer in existence," says Bannon.

For more tips and insurance coverage information for rentals visit .

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Phoebe Chongchua

Phoebe Chongchua is an award-winning journalist, an author, customer service trainer/speaker, and founder of Setting the Service Standard, a customer service training and consulting program offered by Live Fit Enterprises (LFE) based in San Diego, California. She is the publisher of Live Fit Magazine, an online publication that features information on real estate/finance, physical fitness, travel, and philanthropy. Her company, LFE, specializes in media services including marketing, PR, writing, commercials, corporate videos, customer service training, and keynotes & seminars. Visit her magazine website:

Phoebe's articles, feature stories, and columns appear in various publications including The Coast News, Del Mar Village Voice, Rancho Santa Fe Review, and Today's Local News in San Diego, as well as numerous Internet sites. She holds a California real estate license. Phoebe worked for KGTV/10News in San Diego as a Newscaster, Reporter and Community Affairs Specialist for more than a decade. Phoebe's writing is also featured in Donald Trump's book: The Best Real Estate Advice I Ever Received and The Complete Idiot’s Guide to Buying Foreclosures. She is the author of If the Trash Stinks, TAKE IT OUT! 14 Worriless Principles for Your Success.

Contact Phoebe at (858) 259-3646 or [email protected]. Visit for more information.

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