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Habitational Insurance

Habitational insurance, also known as landlord insurance, is a specialized form of commercial property insurance designed to protect owners of residential rental properties. It covers a wide range of properties, including apartments, condos, Airbnb, VRBO, townhomes, boarding houses, hotels, and more. With the increasing frequency of natural disasters like hurricanes and flooding, having the right habitational insurance coverage is more critical than ever.

Let’s check out what habitational insurance is all about, its coverage options, the importance of risk reduction, and the current challenges faced by the industry.

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What is Habitational Insurance?

Habitational insurance is a type of commercial property insurance specifically tailored for owners of residential rental properties or multi-family dwellings. It protects against the risks and liabilities of renting out properties like damage to buildings, loss of rental income, and liability claims from tenants or visitors.

It’s essential for anyone who owns and operates a commercial residential property, regardless of the number of tenants. Some examples of properties that need habitational insurance include:

  • Apartments
  • Condos
  • Rental homes
  • Airbnb & VRBO
  • Student dormitories
  • Townhomes
  • Boarding houses
  • Hotels
  • Timeshares
  • Bed and breakfast establishments

Key Coverage Options in Habitational Insurance Policies

Habitational insurance policies are usually customized to address the unique needs of each property owner. At least, they should be. If you already have habitational coverage, you should ensure any special features of your property, like fireplaces, pools, and the exact number of dwellings, are covered in your policy. Your insurance agent should be on top of all this for you.

Some of the most common coverage options available include:

Property Damage

Property damage coverage in a habitational insurance policy helps cover the expenses of repairing or replacing the insured property in case of damage from things like wind, fire, storms, or other natural disasters. Depending on your property’s location, additional flood and wind coverage might be necessary to protect against region-specific risks like hurricanes and flooding in Mississippi.

Vandalism and Theft

Vandalism and theft coverage is essential for property owners to protect themselves against expenses from acts of vandalism or theft on their premises. This coverage may also include protection for the property owner if one of their tenants’ belongings is stolen while on the insured premises.

Signage

Outdoor signs may not be covered under a standard habitational insurance policy. Signage coverage offers protection against damage to signs caused by events such as inclement weather, fire, vandalism, and theft. Signs can be high-dollar investments, so you want to ensure coverage isn’t overlooked.

Equipment Breakdown

Equipment breakdown coverage helps cover the costs of repairing or replacing expensive equipment and appliances, like central air conditioning units and refrigerators, if there’s a sudden breakdown.

Environmental Cleanup

Environmental cleanup coverage protects property owners from the financial consequences of pollution-related incidents, such as tenant injuries or illnesses caused by mold or other pollutants in the property. This coverage can help cover cleanup costs and bodily injury claims that inevitably arise.

Additional Coverage Options

In addition to the standard coverages mentioned above, property owners can consider adding coverages to their habitational insurance policies:

Loss of Rental Income

Loss of rental income coverage provides financial assistance if you can’t collect rent from tenants due to a covered event, such as a fire or storm, that renders the property uninhabitable.

Building Ordinance and Law

Building ordinance and law coverage helps cover the costs of complying with local building codes and regulations in case of a covered loss. This coverage can be particularly useful if the property requires significant repairs or reconstruction following a covered event.

Tenant Discrimination Liability

Tenant discrimination liability coverage protects property owners against discrimination claims from tenants or prospective tenants. It can help cover legal defense costs and potential settlements or judgments.

Reducing Risks as a Landlord

While maintaining an active habitational insurance policy is crucial, you can also take steps to reduce risks and keep premiums low. Some of the top risks to be aware of as a landlord include fire, swimming pools, water damage, slips and trips, and playgrounds. Most of these are obvious, but you might be surprised at how often they are overlooked and how much they can affect the cost of insurance.

Fire Prevention

Taking preventive measures against fires can help property owners avoid significant costs associated with fire-related damages. Ensuring all rental units have working smoke alarms and regularly maintaining them is key to fire prevention. Property owners should also follow the guidelines set by the National Fire Protection Association (NFPA) for installing and maintaining smoke alarms.

Swimming Pool Safety

Swimming pools can attract tenants, but they also come with potential hazards. Property owners should adhere to local health codes and implement safety measures to minimize risks, like providing rescue equipment and displaying clear pool rules.

Water Damage Mitigation

Water damage can be tough to detect, but property owners should keep an eye out for signs like puddles, stains, and mold whenever they visit their properties. Encouraging tenants to report any signs of water damage also helps with early detection and mitigation.

Slips, Trips, and Falls Prevention

Property owners can minimize the risk of slips, trips, and falls by addressing issues like uneven floors, walkways, and sidewalks. Ensuring carpets are well-maintained, clearing snow and ice during winter storms, and properly handling water runoff and drainage can also help prevent accidents.

Playground Safety

If the property has a playground, property owners should follow the guidelines provided by the United States Consumer Product Safety Commission to maintain a safe play area for children.

Current Challenges in the Habitational Insurance Market

The habitational insurance market is facing significant challenges from massive losses experienced by major insurers in recent years. These losses are largely attributed to wind and hail damage, wildfires, hurricanes, tornadoes, and other storm-related damages. It doesn’t really matter if these disasters aren’t in your area. Insurers are national and international corporations. Their bottom lines are affected by losses across the globe. But in Mississippi, we do get quite a few weather-related risks, so depending on where your property is located in the state, coverage options can be limited, and premiums can be high. Especially on the Gulf coast, the enormous costs associated with hurricanes, wind, and flooding have driven many insurance companies out of the market entirely.

Many insurance carriers are re-evaluating their coverage offerings and tightening their underwriting requirements. Some carriers are increasing policy costs, while others refuse to insure certain properties based on age, location, and required renovations.

What Property Owners Should Do

Given the current challenges in the habitational insurance market, property owners must stay proactive in managing their insurance policies.

Your insurance agent should advise you and help you understand how these changes affect your coverage and explore available options for renewal or finding alternative policies. If your agent isn’t regularly checking in with you about your coverage and helping manage your risks, that’s a problem.

Habitational insurance is a vital protection for property owners renting out residential properties. Understand your various coverage options and take steps to reduce risks. You should ensure you have the right insurance policies in place to safeguard your investments. With the ongoing challenges in the insurance market, being proactive and staying informed is more important than ever.

Our Insurance Specialists

We've been protecting Mississippi businesses for decades. Our agent specialists have tons of experience across all industries, and our agency is backed by Leavitt Group's national family of agencies and experts.

Whether you're considering starting a new business or an established company, we can help answer your questions and provide insurance quotes from multiple companies.

Our job is to make sure all of our business partners are properly protected with insurance coverages that fit their individual business needs. We're all about properly protecting businesses, not just providing the cheapest coverage and moving on. For us, it's about partnerships, not just selling policies.

Ashton Serpas

Commercial Insurance
Ocean Springs, MS

Joe Joe Tharp

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David Pyron

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Ian Cross

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Spencer Mitchener

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Cameron Farmer

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Zac Little

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Jackson, MS

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