Can you bundle your primary and rental property insurance?
Thanks to a booming rental market, more people are choosing to purchase investment condos or rent out their starter homes in a bid to earn some extra cash. Surprisingly though, according to Statistics Canada, less than half of landlords in the country have the right kind of property insurance. It might surprise you to know that your standard home insurance might not be enough to cover you. In fact, there are some key differences between your standard home and landlords insurance.
While you are able to save money by bundling your insurance in many cases, this won’t necessarily work for your rental property. However most people starting out still tend to stick with the same insurer as their primary residence.
What’s the difference?
Lets kick this off with the financial side of things: your landlord’s insurance is probably going to cost more than your regular home insurance. This is because you’re taking into account any potential perils your tenants may run into.
Similar to homeowner’s insurance landlord policies cover the home, any additional buildings on the property and the owner’s possessions. Your tenants possessions should be covered by their own renter's insurance. Although you are not liable for anything belonging to your tenants it is still vital that you take out an effective rental insurance policy.
If you’re renting out a condo, and have decided to install a shiny new bathroom or state-of-the-art kitchen, make sure you have coverage for this. While a condo corporation’s insurance may have you covered for a lot of things, typically newly installed assets won’t be included.
When it comes to landlord’s insurance there are two key types you can take out, depending on the size and capacity of your rental property:
1.Personal lines policy
Your insurance firm may write rental property policies on an individual client basis, but there are usually a few circumstantial limitations, which determine whether you qualify for a policy.
The first thing to take into consideration is the type of rental property owned. If you are renting out a single family home or a duplex, personal lines policy should cover you. However the more residential units within a property, or the size, the more likely a personal lines policy diminishes.
When it comes to personal lines, the property must also be registered in an individual’s name, rather than under a legal entity such as a partnership, LLC or corporation. So, if you have multiple properties and are hoping to register them under a business name, you probably won’t be able to add a personal lines policy to your current register.
Similarly, if you are hoping to insure multiple properties, beware that different companies have different rules on the number they are willing to cover. Different properties have different rates for each firm, so check with your insurer to find out their stance on your rental properties. Furthermore, should your policies all begin and end on different days, it can be a headache trying to follow the stack of paperwork.
2. Commercial lines policy
Commercial insurance covers businesses for the most part. So should the building you’re renting out house a business, commercial landlord’s insurance is the way for you. But, did you know that the size or number of units within your rental property might also require you to take out a commercial lines policy? This is usually the case for properties housing multiple apartments.
These policies can be written in the name of an individual, couple or for a legal entity. While most insurers will be willing to cover larger single family, and many multi-family properties, they too have a few limitations. It is best to check with your insurer up front about how many residences they are willing to insure under one policy. Quite often insurers will write a single policy with a schedule of properties, meaning you can add to it and remove whenever, without having to be worried about chasing a stream of different policies.
You should note that prices may be higher on a commercial lines policy, but they will also cover a lot more scenarios, and carry a higher liability protection should the owner be sued.
Whichever route you decide to go really depends on your personal preferences, you current property size and any plans you may have for expanding your rental portfolio in the future.