People buy homes for different reasons, and as a real estate agent, it’s a good idea to figure out your clients’ intentions so you can fill them in regarding their property insurance. There are several different varieties of property insurance, and not every home will qualify for each respective type.
When someone is buying a home to use as their primary residence, they’ll probably want owner-occupied, a.k.a. homeowner’s insurance. This common type of insurance costs anywhere from 20% to 30% less than the others, but it requires that the owner live in the home. The rationale behind the reduced cost is that insurance companies believe that if the owner lives in the home, they’re more likely to take care of it, reducing overall risk and therefore the premium.
Suppose you have a client that’s buying a second home, or they travel for long periods of time and are not often at the home. They may qualify for owner-occupied insurance, but it may be classified as a “secondary” home. Because someone isn’t always home to take care of the property, the cost can be a bit more.
Non-Owner Occupied – Landlord’s Insurance
When someone is buying a home purely as an investment and their intention is to rent or lease the property, they’ll need landlord’s insurance – not homeowners insurance. Landlord’s insurance provides coverage for someone renting out a home, apartment building or condos. The policy typically covers things like fire, windstorm, falling objects, some water damage and many other perils, as well as liability protection against lawsuits. It can even cover them for the potential loss of income incurred due to the property being uninhabitable because of circumstances outside of their control – and if the policy is appropriately crafted, it can cover for “wrongful eviction.”
That’s often overlooked, but it’s extremely important and could save a lot of grief down the line.
When a condo is tenant-occupied, the owner will secure a “Condo Rented to Others” policy.
It’s important to note that landlord’s insurance isn’t required by law, but just because it isn’t required doesn’t mean it isn’t worth every penny. It provides the property owner (who doesn’t qualify for owner-occupied insurance) with similar protections to those included in a typical homeowners insurance policy. Plus, the lender will require it.