The effects from this unprecedented year have seeped into the lives of rental property owners and their renters. A once flourishing industry hit by COVID-19 gave way to evictions across the country. Landlords, condominium and hotel owners, or rental property owners may have felt the sting of income losses due to the sharp economic downturn and rise in unemployment. With evictions rattling most cities and college students working remotely, is it worth continuing to invest in the commercial and residential habitational industry? The question then becomes, Is habitational insurance coverage still needed?
In the pre-pandemic world, the rental and habitational insurance market was thriving. Now? Rental markets in the U.S. remain extremely tight. Harvard University’s report “America’s Rental Housing 2020” details high-cost rental apartments dominating the market, vacancy rates at an all-time low, and an influx of higher-income households. The question begs, What does a post-pandemic rental landscape look like in 2021?
From Frederick Mutual Insurance Company’s sales and marketing director, Rachael Newmister,
“This report makes one thing clear: The rental property market is here to stay. Shifts in the market are normal; it’s just how we can use these new challenges to create a path of growth and sustainability for habitational property owners, renters, and insurance agents.”
For most cities, home rental prices may continue to rise as they have this year (2020), solidifying the continued need for habitational insurance. Zumper National Rental price index indicates that, following the dip in the pandemic height, the rental prices for both one-bedroom and two-bedroom rental properties are still increasing 1% each year.
Trends suggest that rental prices will continue to increase steadily, but property owners question if the rental income tax rules will change in the tide of the election year. If so, habitational markets will see a change in profitability. It is also predicted the housing industry might take a direct hit from these taxations, but the rental sector may remain steadfast. With fewer people buying homes amidst a housing shortage, rental properties remain in high demand. The investment appears to stay valuable.
So, who needs habitational insurance?
Anyone renting out a property, including single-dwelling landlords, condominium owners, hotels, dormitories, etc., needs habitational insurance.
Why do you need habitational insurance coverage, and what does it entail?
Habitational insurance provides comprehensive coverage for the owners of all types of commercial and residential properties, such as apartment buildings, condominiums, and multi-unit dwellings. While policies can vary, most include coverage for property, general liability and excess, and environmental-impairment liability. You are responsible for the apartment or building that you rent and the tenants and their visitors as well as any employees who help maintain your property.
Frederick Mutual habitational insurance offering
Frederick Mutual is here to help rental and habitational property owners with the right insurance they need. We offer habitational insurance to buildings with a value of $5,000,000 or less per building. If your building is worth more than $5,000,000, you’ll need to contact your underwriter to discuss.
Rental receipts for residential units must be at least $750/month/unit.
Insured government-subsidized tenancies must not exceed 25% of the total occupancy.
The owner or property manager of habitational properties should reside within 50 miles of the property.
All tenants of the habitational property must have a signed lease in place and carry insurance ($1M liability for commercial buildings and $300K liability for homes).
Risk must comply with all life safety code requirements, including a minimum of two means of egress and smoke detectors in all units and the common area.
Written building maintenance agreements, including a hold harmless cause, must be in place, and copies of insurance certificates must be on file.
Mixed-use (commercial and residential) properties that are eligible are subject to underwriter review before starting a habitational insurance contract with Frederick Mutual. To learn more, contact us.
Parking lots for the building must be well maintained and lighted.
All risks are subject to coastal guidelines in Delaware, Maryland, Virginia, and North Carolina.
Resources & article references:
Manage Casa (2020) The US Rental Property Market Outlook, https://managecasa.com/: Gord Collins.