When talking about lessors risk insurance, most people don’t know what a lessor is to start with. This is because when talking about lessors, people generally refer to them as landlords. While landlords may be lessors, all lessors are not the technical definition of a landlord. (Think of a square/rectangle situation.) Recently, there’s been a rise in the amount of people interested in becoming lessors, whether it’s for student housing, apartment complexes, shopping centers, or any other type of multi-unit building.
While some entities know what they’re getting into with their investment, many others only have a vague idea of the risks they face. What’s more alarming is that many of these lessors never consider or buy insurance for their building. Although it’s not legally required to have lessors risk insurance (also called LRO insurance), not having coverage can leave you to deal with some serious losses if anything does happen to your building. If you want to become a lessor, here are 4 reasons to consider insurance coverage for your multi-unit rentals.
Can A Lessor Be Sued for Injuries on Their Property?
Now, this doesn’t mean that if someone were to trip over their own feet, or if a guest was bitten by another tenant’s dog that you would be held liable as a lessor. However, if something that you are responsible for maintaining injures a tenant or a guest, you could be found guilty of negligence if the injured party decides to sue.
Luckily, most lessors risk insurance policies will have a general liability policy as the baseline of its coverage. A lessor’s general liability coverage can help take care of any medical bills and legal fees that come about because of an injury that happens on your property.
For example, if you own a shopping center, a puddle could freeze over and create black ice on one of the common walkways. If the employee of a tenant or one of the visitors of the shopping center were to slip, fall, and break their wrist while trying to catch themselves in the fall, you could be held liable for their injury because the walkway was not cleared of ice.
If you have general liability insurance, however, your policy could help you cover the cost of the person’s hospital visit, cast, x-rays, and physical therapy. If they decide to sue the building, this type of coverage could also help you pay a defense lawyer or the amount of the injured’s settlement payment.
A tenant caught their unit and several others on fire. Who’s liable for the damage?
We know – accidents happen. It just so happens that some accidents are a little costlier than others, especially in a multi-unit building. So, if a tenant’s lamp overheats, and it catches fire to their nearby curtains, and then the fire spreads to their next door neighbor before the first tenant notices – the insurance that the tenants have would help them replace the lamp, the curtains, and anything else that they lost in the fire, but when it comes to the burnt and damaged wall, it’s the duty of the lessor to fix.
This means it’s now your responsibility to reframe, insulate, and rewire the building. Plus, you’ll have to reinstall plumbing, drywall, and repaint however many walls were burned. And that’s not including if the roof was burned or damaged by smoke. The total repair costs can be a lot to handle, to say the least.
That’s why property insurance can be absolutely vital to a lessor. Most property damage sections of an LRO policy include funds to help you cover this type of damage, but also damage due to:
- Windstorms (like hurricanes and tornadoes)
- Smoke damage
- Rain damage
Some lessors risk policies also list a ton of other covered losses in the plan, so you can repair your building(s) without going bankrupt.
That’s why it’s important to shop for rates and compare plans for the lessors risk coverage your specific buildings need. Our agents are experts at learning about your rental property’s specific risks and finding your perfect policy without the complicated to-do and industry lingo. We strive to make insurance as easy and as affordable as possible. So, call us now or fill out our online quote form to start getting free quotes on the type of LRO coverage you need for your leasing investment.
Get the lessors risk insurance you need to protect yourself from risk.
How Can I Bring My Rental Building Up to Code?
Let’s say that there’s a new law passed on plumbing regulations for the buildings in your city, and you own an older building. You may think that everything is fine and dandy until one day, a pipe bursts in a tenant’s unit. When the business calls a plumber out, they say that the entire plumbing system is completely out of date and not up to code. You know – the plumbing system that runs through your entire building? Great.
Now, you’ll have to replace all of the pipes in the building or risk being shut down, and the cost to bring the plumbing up to date is not cheap. If you didn’t have Business Ordinance Coverage, you could very well go bankrupt trying to fix the issue, or you may have to shut down your building altogether because you can’t afford to replace the plumbing by yourself.
BUT if your LRO policy has Business Ordinance coverage, it can help cover the cost of replacing the entire plumbing system, including ripping open the walls to get to pipes and repairing the walls once the job is done.
But How Can I Make Up My Rental Income If My Tenants Can’t Stay in Their Unit?
In our last example, even if you try to fix the plumbing issue unit by unit, you’ll still miss out on rental income by having an unoccupied unit during the repairs. When you invest, operate, or own a rental property, you’re counting on the fact that you’ll have a monthly rental income from that investment. You’ve now come across a situation where your units are uninhabitable by no fault of you or your tenants. That’s why having a business interruption insurance policy can help a great deal while you’re leasing.
Interruption insurance can help reimburse you for the rent you’ll lose while repairing a covered loss. (So honestly, you could use this type of insurance in our fire example as well.)
As a lessor, you know that there are tons more problems that can come with leasing out a property. Luckily, there are tons of options for insurance coverage that can protect you from your particular leasing risks. Coverages like flood damage, mold damage, cyber liability coverage, employee dishonesty insurance, equipment breakdown coverage, errors & omissions policies, and more can be just as smart of an investment as your actual building(s).
Don’t know where to start? Don’t worry! Our insurance experts will get to know the types of buildings you’re leasing and who you’re leasing to in order to get you the best quotes on lessors risk insurance. We customize your quotes so that you can compare only the types of LRO policies that apply to you. Call us today or fill out our online quote form to talk to an insurance expert and find the perfect insurance for you as a lessor.