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Reducing Your Financial Risk With Eviction Insurance

  • June 15, 2020

Needing to evict a tenant is the worst-case scenario for any landlord. However, at a point in life, you will find yourself facing this prospect. An average eviction can take up to eight weeks — that’s eight weeks without rent while you pay fees for court, attorneys, and filing, with a probability that you won’t be compensated for the lost rent.

At the end of this lengthy process, you’ll need to find another tenant and repair any damage caused by the evicted one. What’s more, most rental property insurance policies don’t cover the cost of eviction or non-payments, leaving you to foot the bill. This ranges from $5000 to $7000, even for modest dwellings.

But there is hope. Welcome to the world of eviction insurance.

What is Eviction Insurance?

This is a non-real insurance policy that acts as the first line of defense against a non-paying tenant who may eventually get evicted. Too much to take in?

Let us explain.

Property management companies may offer eviction insurance, which is more like a savings account than an insurance policy. Landlords can do this on their own, saving money each month to draw up in case of an eviction; it’s generally better to obtain eviction insurance by a property management company.

Pros of Eviction Insurance

  • Your property management company is well suited to advise on the monthly rates to cover all expenses.
  • Insuring yourself against the risk can help you avoid cash flow disasters that would be difficult to recover from.
  • It can cover more than one eviction.
  • It covers all costs associated with an eviction.
  • Your property management company will do all the repairs while you worry about other things.

Cons of Eviction Insurance

What Does Eviction Insurance Cover?

There are different types of eviction insurance, but they all apply to the landlord’s risk of losing a tenant.

The first type of eviction insurance covers the lost income from a tenant who can’t pay their rent and is finally evicted. With the current economy, this is the most sought after coverage since many tenants are unable to pay their rents.

The second type of eviction insurance covers wrongful eviction. This happens when the landlord evicts a tenant, who then sues the landlord for wrongful eviction.

In this case, wrongful eviction refers to:

  • Forcefully evicting the tenant by threats or harassment
  • Restriction of certain parts of the client’s home
  • Changes to locks when the tenant is away
  • Stopping essential amenities like water and electricity
  • Withholding keys, and much more.

As a landlord, you are required by law to do evictions humanely. However, if you fall victim to a wrongful eviction claim, the insurance protects you from the cost of defending such claims or paying them.

The third type of insurance is referred to as “mass tenant relocation.” Mass evictions occur if the property is no longer habitable for specific reasons, and all the tenants have to move. This could be a result of negligence, meaning you are required by law to pay the cost of finding new homes for the tenants. The mass tenant relocation insurance covers all associated costs.

What Does it Not Cover?

Eviction insurance only covers costs related to a tenant’s eviction. Therefore, if you experience property damage as a result of fires, floods, or theft, you will need another insurance policy.

Eviction Coverage at Your Fingertips

After successfully evicting a tenant, most landlords start worrying about the costs associated with finding a new tenant themselves and months without rent until the new tenant relocates.

You can avoid all this with the right property management company.

At Property Management Quotes, we connect you with the right property management firm for your situation. We are dedicated to looking out for your best interest while giving you the best hands-off landlord experience that you need for your investment.

Our advice center is always up to date with all things real estate.

For more information, contact us.

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