The liability portion of the landlord insurance policy is something that many landlords overlook or take for granted. A couple reasons for this, one is it is not a frequent claim, it rarely if ever happens. The other reason is that most landlords think 1 million dollars (which is normal on a landlord policy) is enough coverage and it is if you have one or two properties. But if you have 10 or more on one policy then 1 million is suddenly not too much if you have multiple claims in a year.
What typically happens is investors start out with a property or two and then increase that number over time. The problem is they don’t do a policy review and increase the liability limits leaving them and their assets exposed. Ideally you would like a policy to insure each property individually on the policy rather than one limit covering all the properties.
The right coverage is so important as liability claims can be very big. I recently had a client involved in a fire. His neighbor’s house caught on fire and it spread to his house. This would be a liability claim on the neighbor’s insurance. If this house is in a nice neighborhood and burned to the ground we could be talking about a $500,000 claim. If you have 50 properties on a policy you could see where this could be a major problem.
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