Property protection should be non-negotiable—no landlord should risk going without it. Just like you wouldn't (or shouldn't) drive a car around without insurance, you don't want to rent out your property without the proper asset protection.
Prevention, insurance, protection plans—it’s wise to have them all. Whether your resident causes significant damage to your property or your property causes damage to your resident (yes, totally plausible), you'll want to make sure you're legally and financially covered on all fronts.
What Is a Property Protection Plan?
A property protection plan (also known as an asset protection plan) covers the cost of certain damages a tenant may leave behind. Yes, the security deposit can be withheld to help with the costs, but security deposits have limitations in some states. And if the cost of damages exceeds the security deposit, you'll need to get your insurance involved to help.
However, your insurance policy might not be able to cover the damages fully—now what? A property protection plan can cover costs exceeding insurance limitations—this helps expand your coverage and mitigate risk.
Is a Property Protection Plan All I Need?
Not quite. It's definitely something you want in your back pocket in case a resident leaves damages in excess of their security deposit. Still, you'll want to take a few other asset protection measures, too:
Prevent Litigation and Issues
Prevention is always better than a cure. Here are a few ways you can avoid your tenant trashing the place or filing a lawsuit:
- Maintenance: Keep your rental property safe and up-to-code.
- Quality Tenants: Better tenants will take care of your home and be responsible for any damages they cause due to their negligence.
- Review Laws: Stay up-to-date on local, state, and federal laws to ensure everything from your tenant screening to your rental rates is fair and legal.
- Document Everything: If you have to withhold a security deposit for repairs or violations, make sure you keep meticulous records of the situation.
- Require Renters Insurance: Add a clause to your tenant's lease that requires they obtain renters insurance. Even better if their plan includes a coverage called ‘Landlord Liability’ or ‘Personal Liability’ which means that if a resident does something that damages the landlord’s property, they can cover that damage using their Renters Insurance.
Do all of this, and you'll decrease the chances of a lawsuit. However, accidents will happen, and sometimes even the seemingly best tenants will leave a mess of damages. That's why Nomad has our own Property Protection Plan—more on that down the page!
Landlord Insurance Policy
A landlord insurance policy should cover a host of potential problems: property damage, liabilities, lost rent if the property becomes uninhabitable, and more.
However, your typical homeowner's insurance policy is not the same as landlord insurance. When you start renting out your property, you may forfeit some of the coverage on your conventional home insurance policy—make sure you review your contract and switch if necessary.
Types of landlord insurance coverage include:
- Property Protection: Insurance policies that protect your property from natural disasters and damages inflicted by a tenant.
- Personal Property Protection: This insurance protects your personal assets (not the renter's), like your fridge, oven, or lawnmower.
- Liability Insurance: Coverage for legal fees or medical expenses in the case that a tenant or tenant's guest gets hurt on your property.
- Loss of Rent Protection: Coverage for the loss of rental income if a disaster or your tenant's actions cause your property to be temporarily uninhabitable.
Require Renters Insurance
We touched on this briefly above, but it needs reiterating—require renters insurance. Many renters underestimate the value of their possessions or believe that the landlord is responsible if something happens to their belongings.
Renters insurance is not required by law, but you are legally allowed to require that your tenants have renters insurance in the lease agreement.
Landlord insurance would cover if a tenant puts a hole through the drywall, but it wouldn't cover a tenant's TV that fell over—they'll need renters insurance for that. Renters insurance can cover:
- Asset loss due to theft
- Costs due to negligent destruction of the property
- Liability for injuries
- Costs due to natural disasters
Some renter’s insurance policies even include landlord liability coverage. This means that if a tenant causes damage to your property from, say, a cooking fire—then this coverage can be drawn on before your landlord insurance (at Nomad, we ask our tenant’s to include landlord liability coverage with their renter’s insurance policy).
Renters insurance protects both your tenants and you. It's another layer of protection. For example, if you lease your property with Nomad, you'll have multiple layers of coverage if a tenant causes damages:
- Renters insurance
- Security deposit
- Landlord insurance
- Nomad Property Protection Plan
How Does Nomad's Property Protection Plan Work?
It's pretty simple. If a resident causes damages in excess of their security deposit, Nomad will cover costs up to $500,000 that are not recoverable by a Security Deposit, Renter’s Insurance, Homeowner’s or Landlord’s Insurance. That includes repairs, replacements, and/or cleaning required as a result of damages outside of ordinary wear and tear.
So if ol' wreck-it Ralph ends their lease and you discover significant damages, you can withhold their security deposit, collect insurance, and then we'll cover up to $500,000 if needed.
Rest assured, your property is in safe hands with Nomad. And while we can't predict the future, we do have a vested interest in finding you the best-of-the-best tenants for your property. Better tenants for you means less risk for us and less time spent hunting down new tenants. Everyone wins since our interests are aligned.
Property protection is just another way that we help eliminate risk and maximize your rental income. There are many unknowns when it comes to renting out your home, and we want to provide you with all the peace of mind you need. Dig deeper into your expected costs and income with our quick-and-easy-to-use Rental Income Calculator.
As always, talk to a legal professional to make sure you're doing everything possible to cover your assets fully. A few minutes and dollars spent now are worth it to ensure your home is protected.