Do you need Insurance on Your Rental Properties?

I was reminded why I have insurance on my rentals properties recently. A severe thunderstorm blew through the Northern Colorado area and laid a blanket of golf ball sized hail across some of my properties. The picture seen in this article is of the side of one of my rental properties. That shows the entire side of the house with holes from the hail. This neighborhood also had broken windows in houses along with roofs that were trashed in addition to extensive damage to the residents’ cars.

We decided to drive by our properties to see what we had to deal with. We went by the house with known damage first, and it was pelted with hail as well as the rest of the neighborhood. Every house we saw had holes in the siding, broken windows, and the cars had major dents and broken widows as well. Thankfully the other rentals were all in much better shape than rental property number 1.

How much damage did the storm do to my rentals?

Most of our rentals have roof damage and rental number one has siding damage. Our personal home that we just bought three weeks ago needs a new roof, has holes in the stucco, holes in the vinyl fence, broken light fixtures, damaged trim and garage doors. My wife’s Acadia was outside and it has hail damage as well.

We were in the process of getting estimates when the sewer backed up in rental number 6. We had to get another claim going on that property and had to get a contractor over right away to clean up the mess. They had to cut out drywall, take out the toilet and vanity and pull up some carpet.

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Lessons learned about insuring rentals

It is good to have insurance, and luckily my insurance agent talked me into getting sewer backup coverage on my rentals. The tricky part has been coordinating 6 different claims on all my properties. I have each property in a separate LLC for legal liability reasons. Turns out, I have separate policies on each rental because of that. If I would have had them all in my name or in one LLC they would all be under one policy, and I would only have to pay one deductible. However, I still think it is worth it to have everything in a separate LLC.

Staying positive about the massive damage from insurance

As many of you know, I am all about being positive, and I think attitude has a great deal to do with how much we each succeed. This last week has been a tester for sure! My coaches and people I listen to for inspiration always say, it is easy to be positive when things are going well. The hard part is being positive when things are going bad. I have been doing my best to look at the positive and ignore the bad stuff.  Here is how this all could be positively:

1. I will probably get new roofs on most if not all of my houses. Some had older roofs that would have needed to be replaced eventually, and this is a huge break to have homeowners insurance pay for them, instead of myself. I will still have to pay deductibles, but that is a small price to pay compared to a new roof. I think my deductibles are $1,000 on each property.

2. I had sewer backup insurance on rental number 6. This would have cost me thousands if I had not included this rider in my policy. When they pulled out drywall, they found mold behind some of the walls. We were able to kill two birds with one stone by taking out the mold when doing the repairs for the sewer!

3. My wife has wanted a new car as hers is always in the shop. We will see if they total it or not, but if they do that makes our decision very easy and she will get a new car.

4. I was able to get home in time to avoid any damage to my car.  No one was hurt, and it was quite an experience seeing that storm move through.

Why wouldn’t you get insurance on your rentals?

I know some landlords who do not have insurance on their rental properties. They feel the cost to insure is more than they would pay, if they ever needed the insurance. This makes sense in a way, since the insurance companies are in the business to make money. The numbers tell the insurance companies how much to charge so that the premiums are more than any pay outs they have to make.

The problem with self-insuring properties is you have to have the money to make the repairs if something does happen. Most of the landlords I know who self-insure are very wealthy and own their homes outright. Banks will not let homeowners self-insure because they want to be sure the property they made a loan against is in good shape.


It has added a lot to my already busy schedule to get all the claims going, meet roofers, provide seamless gutters, talk to adjusters and figure out all the damage.  In the long run ,the houses will be in better shape for minimal out-of-pocket expenses.  I’ll be waiting patiently to see how much the insurance will give us for everything.  Hopefully this is the last storm like this for a long time.

Update 8-28-13

The numbers are in for the homeowners insurance payouts:

  • Personal residence $39,000 + for roof, gutters, fence, stucco, garage doors, trim and other small items
  • Rental property number 7 $6,000 + for roof
  • Rental property number 1 $9,000 + for roof and siding
  • Rental property number 5 $4,000 + for roof
  • Rental property number 4 $5,000 + for roof
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