When an investor is purchasing a property with the intention of leasing it out for long-term rental income, what type of investment insurance policy do they need? The answer, of course, is it depends!
The three most common policy types are:
- Landlord Dwelling
- Vacant Dwelling
- Builder’s Risk
If the property is already leased with a tenant in place, then a Landlord Dwelling (also called a Dwelling Fire or DP-3) is the proper policy to cover the home.
But what if the home is vacant and needs renovations before a tenant can move in? In that situation we have a couple of options, depending on the extent of the rehab.
Most often, a Vacant Dwelling policy is the answer. It covers the property while more basic renovations are preformed, usually encompassing a few of the following “big five”:
Those are the most common types of repairs which can take a few weeks to complete.
Now if the property will undergo major, down-to-the-studs renovations, a Builders Risk policy is the most appropriate policy. A Builders Risk policy covers the dwelling in the course of construction, and can usually be written on a 6-month or 12-month basis.
Understanding the proper type of investment insurance policy needed will protect the investor from potentially having a claim denied if the wrong policy is in place.
Feel free to reach out if you have any insurance questions: