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What Type of Landlord Insurance Do You Need?

What Type of Landlord Insurance Do You Need?

Landlord insurance is not required by law in Phoenix, but it can save you from major losses.

An accident or weather event can happen when you least expect it. Damages to your property can cost you thousands of dollars out of pocket without the right insurance plan.

To stay covered, you need to know about the different types of landlord insurance. Keep reading to learn them.

Types of Landlord Insurance

Landlord insurance requires owners to pay a small deductible for coverage. While there are basic policies, you might be inclined to include additional coverages for non-traditional events.

To stay a successful real estate investor, you need consistent cash flow. You can't do this without insurance.

Your coverage will depend on your policy. Dwelling policies are the most common type of coverage. The more dwellings you have, the more coverage you will need.

Dwelling Policy 1 (DP1)

DP1 is a cheap landlord insurance policy because it provides limited coverage. This basic policy only covers 10 specific causes, such as:

  • Fire and Lightning
  • Internal Explosion
  • External Explosion
  • Vandalism and Malicious Mischief
  • Windstorm and Hail
  • Smoke
  • Volcanic Explosion
  • Riot and Civil Commotion
  • Aircraft
  • Vehicles

If you file a claim for one of the causes, you should receive the actual cash value (ACV) of the property.

Most landlords avoid this policy because it means spending a lot of money out of pocket. As the ACV is depreciated, the amount you receive from a claim will be less than the cost of repairs.

Dwelling Policy 2 (DP2)

DP2 insurance is more common because landlords receive the replacement cost value (RCV) for a covered event. The claim pays to restore the property completely.

While this doesn't seem like a huge difference, it could mean thousands of dollars more for property damages from the same 10 perils of DP1 and:

  • Weight of Ice and Snow
  • Burglary Damage
  • Falling Objects
  • Electrical Damage
  • Accidental Discharge or Overflow of Water
  • Glass Breakage
  • Freezing Pipes
  • Bulging, Burning, Cracking, Collapse, and Tearing Apart

Tenants may need to move out in the event of major property damage. DP2 also pays the landlord for lost rent (loss of use) while repairs are being made.

Dwelling Policy 3 (DP3)

DP3 is the most comprehensive insurance option. This dwelling coverage is, in simple terms, an all-risk policy. There are no explicitly listed covered perils.

Because this is the most comprehensive coverage option, it is the most expensive. Most importantly, DP3 insurance provides landlords with liability protection.

It can get expensive if you have a large real estate investment portfolio. This coverage is worth the cost for many successful landlords.

How Can a Property Manager Help?

New property owners in Phoenix might not understand the risks associated with real estate investing. A property manager does.

Real Property Management Phoenix Valley is a full-service property management company helping landlords like you. Our leadership can provide comprehensive services and helpful advice regarding landlord insurance.

We've been in the business long enough to look at a property and uncover its risks. With the information we gather, we can recommend the best coverage option for your needs.

Contact us today to learn more about our services.