Rental House Insurance – Which Form Is Which

If you own a rental house, then you probably have an insurance policy covering the house itself. You may have set this up in a hurry when you realized that you were keeping the home instead of selling it as happens to so many accidental landlords, or you may be a landlord with multiple properties with a more measured and considered approach. Either way, one part of the insurance process that you need to take a moment to understand, is which dwelling fire insurance form is covering your rental house property. Too many landlords just assume that the coverage on their rental property is the same as the protection on their homeowners insurance with which they tend to have more familiarity, but this is not true. Dwelling fire insurance for rental property is almost always more restrictive than homeowners insurance so it is important to understand the differences before a claim occurs.

The three different dwelling fire forms most commonly used in North Carolina are called the DP1, DP2 and DP 3 forms. Each successively higher numbered form provides broader coverage in terms of which types of perils are included with DP-1 being the most basic coverage form and DP-3 being the most advanced. You should read your policy carefully to be sure that you have the insurance that you need and want and this blog should help to give you an overview of the different types of forms available in North Carolina. This way, you can begin your discussion with your insurance agent from a semi-informed point of view. Please note that this discussion centers on the perils for each form as regards the dwelling itself and we are not focused here on the perils that may apply to personal property within the house.

Let’s start with the DP-1. After that, each successive form will build on the others so you can get a quick overview of the increasing protection provided by each form. The DP-1 is often referred to as the basic form. This form will provide coverage to your rental property for the following types of perils: Fire or lightning, Internal Explosion, Windstorm or Hail, Explosion, Riot or Civil Commotion, Aircraft Damage, Vehicle Damage, Smoke Damage, and Volcanic Eruption. You may also, for an additional premium, add protection for Vandalism and Malicious Mischief.

Now let’s take a look at the DP-2 form in NC. We can start with all of the perils insured against in the DP-1 form and then add the following additional perils: Damage Caused by Burglars, Falling Objects, Weight of Ice Sleet or Snow, Accidental Discharge or Overflow of Water or Steam, Sudden and Accidental Tearing Apart Cracking, Burning or Bulging, Freezing, and Sudden and Accidental
Damage from Artificially Generated Electrical Current. As you can see, this form has broadened the list of possible perils that may occur to your rental property.

Now, for our discussion of the DP-3 form, we have to take a different approach. The DP-3 form is much closer to the homeowners 3 from that so many people are familiar with in North Carolina. This is because, unlike forms DP-1 and DP-2 which spell out which perils are insured, the DP-3 form says all perils are covered unless they are specifically excluded. This requires you to read the form with a bit more creativity. Now, instead of focusing on the perils covered section of the policy form, you really need to read the exclusions section of the policy language to see what is not covered. You will need to read the form in detail to discover all of the excluded perils, but here is a short list of some of the exclusions: Water Damage, Collapse, Wear and Tear, Smog, War, Nuclear Explosion and many others.

Now that you have a brief overview of the differences in the insured perils in the 3 different NC dwelling fire insurance forms, you can have a better idea of what type of insurance policy you want to purchase for your rental house. The higher the form number, then the broader the coverage will be and of course, the higher the cost of the insurance. Take the time to review the insurance policy on your rental property to be sure that it provides the protection that you want and expect.

At Clinard Insurance Group, in Winston Salem, NC, we want all insurance buyers to be educated consumers. If we can help you with your rental property insurance policy, please feel free to call us, toll free, at 877-687-7557 or visit us on the web at www.ClinardInsurance.com.

This article was written from other information and articles which can be found in their entirety at www.InsuranceAnswerGuy.com. Please check there for more detailed information on this topic.

Need Insurance For Your NC Rent House? – Here Are The Basics

We see it so often, what I call the accidental landlord. By various means people end up owning a house that they rent to others. I’m fairly sure that most of these accidental landlords would do better to sell out and move on but for various reasons, many prefer to try their hand at this new business that they find themselves thrust into due to divorce, inheritance, declining neighborhood and many other reasons. So if you find yourself with a house you own and can’t or don’t want to sell, then you need to understand the insurance angle of this new house rental business that you have created.

The starting point for this discussion will be an assumption that your rental dwelling is located in North Carolina. The rules and programs will differ from state to state but this discussion will focus on rental houses located in NC.

Most accidental landlords get started by searching out the most obvious insurance need - insurance for the structure itself. The policy that they seek is often referred to as a dwelling fire policy. Start by evaluating your worst case scenario, a total fire loss to the house. Will you build it back? Will you just settle with the bank if there is mortgage? Answering these questions will help you to decide if you want to purchase full replacement protection or just cover the amount that you think the home would be worth. Most dwelling fire policies will also allow for a limit of coverage for the contents in the home. If you are leaving behind your refrigerator, washer, dryer and other items that are not permanently attached to the house itself, you should consider adding a contents limit on your dwelling fire policy to cover losses to these items.

Next you should give consideration to the policy form that you will want to purchase. In NC, most dwelling fire policies are written on the DP-1, DP-2 or DP-3 form. Each higher number form provides coverage for more different types of perils that the form before it. Also, the higher the form number, the higher the cost of the insurance. I will take up a detailed explanation of these different form types in a future blog, so please stay tuned for that information.

Now, take a moment and consider the deductible that you will choose for this policy. The deductible is simply the amount of each loss that you will pay out of your pocket before the insurance kicks in. It is wise here to work carefully with your agent to understand exactly how much money you will save by moving to each higher level of deductible. Then you can pit those savings against the additional amount of money that each higher deductible will require from you in a claim, to determine which best fits your budget.

After the property coverage has been taken care of, you now need to think about the liability coverage for your rental house. You need protection in case someone is injured on your property and you are found to be legally liable for the injuries. You will need to select a limit of liability from those offered by your insurance company. Many companies don’t allow you to add the liability coverage to your dwelling fire policy so you may have to add this protection to your homeowners policy that covers the home where you live. Be very careful here to purchase the highest liability limit that you feel you can afford as this is an area where the amount of maximum loss to you is an unknown number.

Last of all, if you carry an umbrella policy to add higher limits to your home and auto insurance protection, don’t forget to call your agent who handles your umbrella insurance and have them add this rental location to your umbrella policy so that the umbrella protection will cover liability losses at your rental property.

At Clinard Insurance Group, in Winston Salem, NC, we want all insurance buyers to be informed consumers. We advocate the use of a licensed, independent agent to help you with your insurance questions and decisions. Insurance is too important to be a do it yourself process as so many TV ads would have you think. If we can help you with your auto insurance, your home insurance, or the insurance on your rental properties, please feel free to call us, toll free, at 877-687-7557.

The basic source information for this article can be found in other articles posted at www.InsuranceAnswerGuy.com.