What Does Rental Property Insurance cover in New Mexico?

Renting out a property to an unknown party involves risks that need to be considered. Every property owner should have rental property insurance to ensure that the risks involved are taken care of from a legal standpoint. If you are renting out your property for a long period of time, it is bound to go through some damages that might be too much to deal with. If you have rental property insurance, you will be able to bear the financial losses that might come your way. 

What Is Rental Property Insurance, and Why You May Need it in New Mexico?

As mentioned above, rental property insurance, or landlord insurance, covers the risks involved when you rent out your property. This insurance can cover property damage and the rental loss that comes with it, liability costs, and all the other mishaps that might befall your property when renting it out. 

Be mindful that the tenants are not liable to any damage (unless they caused the damage). You will have to bear the consequences if something is damaged, no matter how big or small it is. 

In most cases, people confuse rental property insurance with habitational insurance as they are quite similar. However, rental property insurance deals with the additional strain of renting out the property to various tenants – people you don't know. This unique factor makes rental property insurance a bit more complicated than the habitational insurance policy. 

What Are The Types of Rental Property Insurance?

Rental property insurance has different forms that cover different expenses. The level of coverage depends solely on the type of rental property insurance you possess. Therefore, whenever you plan on getting rental property insurance, make sure you are familiar with all the different forms of this particular insurance. Choose a policy that is best suited to your needs. 

DP-1 

DP stands for dwelling policy. The DP-1 rental property insurance deals with the basic coverage of the property. In this insurance, the homeowner will have to specify the kind of damage they need the insurer to pay for. Only the things listed in the policy shall be reimbursed to the property owner. It is then up to the insurer whether or not to agree upon request. 

DP-2 

The DP-2 rental property insurance is a broader form that might cost a little more. Like DP1, this insurance policy is also based on a written basis. However, the property owner can request broader coverage. It means that they can include more incidents in the insurance policy. For instance, DP-1 might not cover the financial loss due to a burglary – DP-2 will.

DP-3

DP-3 is the most expensive and most effective rental property insurance. This insurance policy includes all the damage done to the property. No matter how big or small the damage is, it will be reimbursed to the property owner on a replacement cost basis. 

What Does Rental Property Insurance Cover?

Rental property insurance has various policies that cover the costs of property damage. The policies can be changed with an addition of a clause or two according to the homeowner's needs. Generally, rental property insurance covers structural damage to the property, liability coverage, loss of contents of the property or homeowner's personal belongings, and the loss of rental income during the time of damage control. 

Structural Damage to the Property 

The rental property insurance covers the cost of structural damage to the property. All the physical damages around the house will be reimbursed to the property owner, considering the gravity of the damage. Any physical item that does not belong to the tenant can be claimed using this insurance.

However, the property owners need to ensure that they understand the basis of the damage that has occurred. Get an insurance policy based on the written perils before asking for reimbursement. 

Liability Coverage 

Accidents are inevitable. If something happens to anyone on your property, be it a tenant or someone visiting, the property owner will have to pay for the damage. All the medical costs will fall on the head of the homeowner. These costs can be quite crippling, depending on the severity of the injury. 

However, rental property insurance covers the physical and financial damage caused on the property. All the potential liabilities will be covered under this policy. The only thing the property owners need to be mindful of is the policy limits. 

Coverage of Personal Belongings of the Property Owner

Anything resting on the property that belongs to the property owner remains there even when the tenants have shifted inside the house. However, if the property owner has rental property insurance, these belongings are safe if something were to happen to them. Depending on the damage, the property owner will be reimbursed in full or to the policy's limits. 

However, the property owners need to specify the peril in the insurance policy. Otherwise, it might be a tricky case to put forth. 

Loss of Rental Income 

If the rented property is damaged beyond control, it might be uninhabitable for a while. During this time, the property owner will be left with no means to earn money on a monthly basis. However, if they have rental property insurance, the loss of rental income will be reimbursed until the property is renovated and fully prepared for new tenants. 

Rental Property Insurance is a must-have for property owners who want to have financial security. However, it is imperative to look into the type of rental insurance they are buying. The DP-3 is the broadest form of rental insurance that covers all the perils. Make sure to check the coverage and policy limits before deciding on a rental insurance policy. In some cases, the coverage is offered as an optional clause. Approach a specialty insurance agent. They will walk you through every step of the process.