by Edward Sneneh, Insurance Navy, Chicago, Illinois

Insurance rates for rental properties
can be divided into two parts, based on the classification of the rental properties themselves. It is important to understand the distinction first. Basically the number of units and use are the main factors affecting the classification.

Insurance for Rental Properties of 1 - 4 Units

Insuring buildings with 1 to 4 units entails less risk for carriers compared with insuring larger commercial properties of five units or more. Also some companies stop offering coverage for properties above certain numbers of stories (3 or 7 for example.)

Properties that are 4 or less units can be insured under a commercial policy. In certain circumstances, a dwelling fire policy (form of personal insurance) may also be offered for these properties. If the insured person occupies one of the units in property of 4 units or less, then a regular homeowners policy may be used to cover them. In this proper landlord liability coverage is needed to cover people with exposure to renting tenants. Properties of 4 unites or less may not qualify for any personal insurance (dwelling fire or homeowners insurance) if there is mix use then commercial coverage is necessary.

Insurance for Rental Properties Over 4 Units

Insurance coverage for rental properties over 4 units are subject to different underwriting guidelines. More scrutinized rules related to risk acceptability and pricing are used with these properties. More attention is given to age of the building and the safety measure used such as fire extinguishing systems; exit signs; safety of hallways and common areas; updates of the electrical, heat and plumbing systems; accessibility and safety of the parking area & stairs; etc. Buildings with commercial stores exposures undergo further scrutiny regarding types & activities of business operated in the commercial units and hours of operations.

Habitational Insurance Programs Coverages

Typical coverages in the habitational insurance programs include building coverage, liability coverage, and loss of rental income. Certain coverage may be critical to the property owner such as ordinance of law coverage. Replacement cost coverage is desirable if available (older buildings may not qualify with certain insurers.) Depending the location of the risk, replacement cost may range between $125 to $150 per square foot. Liability coverage offers protection for the owners against any lawsuits brought against them from tenants and the public. Bigger investment properties may require higher liability, in which case an umbrella policy may be necessary. Loss or rental income is important to provide for the loss of rental income in the event of loss, such as fire.

Ordinance of Law Insurance for Rental Properties

Ordinance of law coverage is an essential insurance coverage for investment properties. Ordinance of law coverage will pay for the additional expenses needed  to meet the terms of zoning ordinance or laws, monitoring  the erection, restoration or pulling down of the covered building. Since new laws and buildings ordinance emerge every day, the cost of construction may change as well. For example, a new construction ordinance may require the installation of automatic sprinkler system for any new construction or major rejuvenation of building above specific number of square footage. If a building catches on fire where the zoning authorities insist on having an automatic sprinkler system before issuing remodeling or new construction permit, the insurance will not pay for the new automatic sprinkler system unless the ordinance of law is part of the coverage.

Comprehensive habitational insurance program is not easily attainable from the majority of insurance agents. Understanding the different restrictions, use, and insurers offering coverage are all important factors to get the right price.

 InsuranceNavy Agency is a Chicago, Illinois based commercial and personal insurance agency and a leader in the Illinois Property Insurance and Homeowners Insurance.  InsuranceNavy is appointed by many commercial Property and liability insurers  in the States of Illinois and Indiana. The agency offers its services through several locations in the Chicago and suburban areas.

For quick and free consultation for your habitational insurance, insurance quotes for rental properties, or quick estimates please call one of our licensed insurance agents at:

708. 233.4848
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Rye Auto Insurance said...
Thanks for the post! Great information...

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