In the United States, buying homeowners insurance when buying a house is a given. But if you’re renting a place or renting out a place, you would need to buy renters insurance or fire (DP3) insurance. Summer is the most popular time for buying houses because many parents want the best school district for their children. Many investors from China and Northern California often choose to buy real estate in California, but what are the differences in insurance selections between investing in real estate and for personal use?

Insurance you purchase for personal use is often more comprehensive. In addition to replacement costs and liability insurance, it also comes with basic personal property coverage. In the United States, considering how often suing cases occurs, having proper liability insurance is very important. Not only does it deal with claims that occur in the house, but also the claims made outside of the house. For example if a couple went grocery shopping, and their shopping cart hit someone’s child, if they get sued, the liability coverage can cover those claims.

For those who possess one or multiple real estate(s), to avoid accidents that can cause them to lose their assets, it is highly suggested that they increase their coverage amount. Liability coverage premium differences between $300,000 and $500,000 is usually less than $10 each year, yet this can also provide you and your family with more protection. This insurance also covers the cost necessary for living (food and shelter) if the house were to be renovated after a covered incident.

Fire (DP3) insurance is the rental insurance that protects the property/house and is pretty similar to basic homeowners insurance. It covers fire, tornado, hurricane, water leakage, and many more—but don’t get them confused. These two are two different types of insurance. Since the house is for others to live in, the owner only needs to protect the dwelling itself. Fire (DP3) insurance would not cover personal belongings in the house. Some landlords ask their tenants to purchase renters insurance to prevent them from losing their belongings in the event of a theft. Renters insurance would be able to protect the tenant’s personal property and a part of liability as well.

Renters insurance also covers liability insurance so if the tenant and the landlord have any conflicts, liability can cover those claims. If the house is in need of renovation due to natural disasters such as a fire or water leakage, renters insurance includes compensation for the loss. Unfortunately, the protection does not compensate for losses caused by the tenant not paying up. While the house is in renovation, the owner would not receive rent, but the insurance company will compensate for the loss.

Real estate is a good form of investment, but in the United States, before renting out your place, it is important to do a background check on the tenant. This includes checking their previous rental records, criminal records, DUIs, and other information. If you happen to encounter a bad tenant, this would cause a lot of trouble for the landlord. The law protects the rights and interests of the tenants so even if they can’t pay the rent, the owner can’t kick the tenant out or throw out their belongings. If the owner really wants to kick them out, they’ll have to take it to court—the application process itself could take half a year! In these six months, not only will the owner not receive any income, but they would also be worrying about the tenant damaging their property. With this being said, it’s very important that the owner chooses their tenants carefully and wisely.

Homeowners usually choose to purchase the insurance with the highest deductibles because everything is under their control and they know they won’t damage the house. However, it’s best to buy the DP3 (fire) insurance that has the lowest deductibles and higher liability because even though its premiums are a bit higher, if your house does ever get damaged, paying a lower deductible is more affordable. You’ll also have more protection. There are typically three levels of liability, $100,000, $300,000, and $500,000. A higher amount doesn’t affect the premiums too much—it would be around a $10 difference.

For many people, buying a house is a big investment. Choosing a reliable insurance company and a comprehensive insurance plan is the best way to ensure you and your family’s safety. If you have any questions about homeowners insurance, please feel free to call us at KCAL Insurance Agency at (626)333-1111 and ask for the homeowners’ insurance department. We have many certified, professional agents ready to answer your questions and help you with anything you need.  We can provide you with a free quote as well or you can request a free quote online and we will contact you as soon we can!