What Landlords Need to Know about Investment Property and Rental Home Insurance in Illinois

Owning a rental property in Illinois provides many financial benefits. However, without sufficient investment property and rental home insurance, these properties can lead to costly liabilities. Landlords have a responsibility to protect their property and income from potential risks, including damage caused by tenants, vandals, or unforeseen events.

This article gathers important insights into investment property insurance and the essential coverages landlords need to protect themselves and their assets. 

What is Investment Property Insurance?

Investment property insurance, or landlord insurance, is designed for landlords who own properties that are not their primary residences. Unoccupied properties cannot be insured with conventional homeowners policies. Therefore, owners need special insurance to protect against the risks of renting.

Insurance for income-generating real estate must provide specialized coverage to protect the homeowner’s bottom line in case of renter-caused damage or other unexpected incidents. These protections should include coverage for the following:

• Damage caused by tenants
• Legal liabilities
• Theft or vandalism
• Structural damage
• Income loss

Landlords should carefully consider each category when planning investment property or rental property insurance in Illinois. Regardless of whether the property is a single-family home, duplex, condo, or apartment complex, landlords must recognize the distinction between homeowners and investment property insurance to protect their assets.

Essential Coverages Every Landlord Needs

To cover the most prevalent risks to rental properties, landlords should consider investment and rental home insurance policies that include these essential coverages:

1. Dwelling Coverage: Dwelling coverage protects the structure itself when it needs to be repaired or rebuilt after a covered loss, such as theft, fire, or weather damage. This coverage includes the walls, roof, windows, flooring, and other interior features that are part of the base structure.
2. Loss of Rental Income: If a landlord’s property becomes uninhabitable due to a covered loss, this insurance reimburses their lost rental income.
3. Personal Property Coverage: Landlords often store property on-site, including lawnmowers, blowers, and other landscaping equipment. However, assets unrelated to maintaining the property, such as the landlord’s or tenants’ personal property, are not usually covered.
4. Landlord Liability: Landlords are often financially responsible for property damage or injuries that occur on their rental or investment properties. These liabilities should be covered by their insurance policies.
5. Vandalism Coverage: The landlord should also have a policy that covers intentional theft or damage to their property.

Experienced insurance consultants can help landlords match their coverage to their property’s needs. For example, landlords should match their dwelling coverage to the real-world replacement cost of the structure, including labor and material costs in Illinois, rather than the property’s market value. Experienced local agents can help match the coverage to the situation.

Coverage Exclusions and Extensions

Even policies equipped with these coverages often lack coverage for common types of damage. To avoid paying out-of-pocket for damage that isn’t covered by normal renters’ insurance policies, landlords should consider these exclusions as potential riders for their policy.

• Belongings Coverage
• Flood Coverage
• Maintenance Coverage
• Pest Coverage

Optional riders can help landlords cover these and other policy gaps. Many property owners fail to realize that their high-value belongings or fixtures are not adequately protected under their current policy. A consultation with an experienced local insurance vendor can help customize the coverage with add-ons that meet the owner’s exact needs.

How to Lower Premiums on Investment and Rental Property Insurance

By following these simple guidelines, landlords in Illinois can potentially lower their premiums:

1. Screen Tenants: A more detailed screening process can help landlords mitigate risks.
2. Bundle Policies: Bundling property, land, and vehicle insurance policies can result in significant savings.
3. Maintain Property: By maintaining their properties, landlords can prevent accidents and other costly liabilities.
4. Raise Deductible: By raising the deductible on their policy, landlords can lower their premiums without sacrificing coverage.
5. Improve Facilities: Improving the property with additional security or safety features can protect residents and improve their insurance risk profile.
6. Compare Providers: Comparing providers can help landlords match their policies to their specific situations, including conducting regular policy reviews to make sure their coverage fits their current needs.

Partner with Local Insurance Agents to Protect Your Investment

First-time landlords and seasoned real estate investors need comprehensive investment and rental property insurance policies. Conventional homeowners policies cannot protect unoccupied or rented dwellings. Many property owners rent out their buildings with unnecessary liability risks by failing to maintain relevant coverage.

At Pro Insurance Group, our experienced team of local insurance professionals helps landlords and other property investors reduce their liabilities and improve their coverage in Illinois. We can guide you through the process of obtaining, customizing, and updating rental insurance policies to protect your valuable assets from both predicted and unforeseen events.

Contact our team today to receive a free quote and consultation and start building a cost-effective investment property insurance strategy for your assets.