Habitational insurance protects both landlords and homeowner’s/condo associations. It can cover both your building and any liability concerns.
Who Needs Habitational Insurance?
If you invest in rental real estate, you need habitational insurance to protect your investment in case something happens to your property, or someone files a lawsuit against you. If you’re a member of a homeowner’s or condo association, you may need to insure a multi-home building, common areas, or rental units. An association would have similar coverage options to an individual investor.
Is There a Difference Between Habitational Insurance and Landlord Insurance?
If you’re a landlord, the difference between habitational insurance and landlord insurance is in name only. They have similar types of coverages, but what type of building you can insure may vary. Policies sold as landlord insurance are mostly targeted towards a landlord or owns one or a few homes. Habitational insurance policies are geared more towards multi-family housing or investors with many properties in their portfolio.
What Can Habitational Insurance Cover?
Your habitational insurance can cover the following areas.
- Habitable buildings
- Clubhouses
- Fitness centers
- Laundry rooms
- Swimming pools
- Playgrounds
- Tennis or basketball courts
- Ponds (against drowning risk)
What Coverages Does Habitational Insurance Include?
Habitational insurance can provide the following coverages.
General Liability
General liability insurance primarily protects you against personal injury lawsuits. If someone drowns in your pool or gets hurt on your tennis court, your general liability coverage will typically provide legal defense and cover any settlement. If a resident or visitor slips and falls on a sidewalk or in a common area or gets hurt by construction or maintenance work, general liability coverage can also provide protection.
Excess General Liability or Umbrella Coverage
The most common limits for habitational insurance general liability coverages are around $1 to $2 million. This can cover most incidents, but lawsuits for a death or a disabling injury can far exceed your standard limits. Multiple incidents or incidents where many people were hurt can also exceed your coverage. Excess general liability coverage can provide much higher liability limits in case of these types of events.
Property Damage
Property damage protection covers your buildings and other structures against perils such as weather, fire, and vandalism. These types of hazards can sometimes be your biggest risk as an investor since you’d be faced with the possible total loss of your initial investment if something happened to your rental property. For homeowners or condo associations, needing to replace a common area could mean requiring a very large assessment or going without a crucial amenity for years.
Flood and Earthquake Coverage
Flooding and earthquake coverage are usually separate options. These events are difficult to insure because they cause extensive damage over a large area, so they’re usually excluded from standard policies. Some habitational insurance policies may allow you to bundle this coverage as an extra option.
Cyber Insurance
You probably have very sensitive information about your tenants or association members. If you have a data breach, you could be forced to pay for identity theft protection, any financial losses, and other costs. This is also a separate coverage that you can commonly bundle.
Hired and Non-Owned Commercial Auto Liability Insurance
If you rent a vehicle to do work or a board member or other employee uses their own vehicle on behalf of your investment company or the association, you could be liable for any injuries that happen from a resulting accident. This is usually excluded from your commercial general liability insurance, but you can bundle a hired and non-owned auto policy to have complete coverage.
Loss of Rental Income
Major damage to a rental property could mean the landlord needs to abate rent or cancel the remainder of the lease to allow repairs. If you add loss of rental income coverage, you can be reimbursed for the lost rent between the time of a covered disaster and when you restore the unit to a liveable condition.
Outdoor Signs
Outdoor signs usually aren’t included in your general property coverage because they’re at a higher risk of damage or vandalism. However, these signs can still represent a large investment that you can’t easily afford to lose. This coverage gives you the protection you need.
Can You Require Renter’s Insurance or Homeowner’s Insurance Instead of Buying Habitational Insurance?
Habitational insurance is a different type of insurance from the insurance that your residents can purchase. Renter’s insurance provides the renter with liability protection for their own actions plus property protection for their personal property. Homeowner’s insurance or condo owner’s insurance covers the same thing as renter’s insurance plus the building or space that the owner owns. None of these coverages extend to your own liability or to the areas that you own.
What Type of Buildings Can You Insure?
Habitational insurance can cover everything from a small single-family home to a large, high-rise apartment building. Some insurance companies may have their own restrictions or focus on specific types of buildings. Older buildings or buildings with riskier construction types may need to pay a higher premium.
Talk to Your Insurance Agent
Your insurance agent can help you figure out what types of coverage you need and may also be able to get your residents a group discount on renter’s, homeowner’s, or condo owner’s insurance. Contact us now to learn more or to request a quote.
