by Clark Sanchez, State Farm
All insurance companies review data about the properties they insure. Most send a service out or have their agents snap some photos, while some look at photos and information online. When an insurance agent says something like “We do not send inspectors out to look at your property,” it only means that they use online information or other databases instead.
There are two major categories that insurance companies look at: (1) the overall condition of the house, and (2) the “housekeeping” around the house and on the property. Number one is obvious to most landlords. They know that shingles missing from the roof or paint peeling on the exterior walls will probably disqualify the property for all but a few “high risk” specialty insurance companies. But what can be a surprise to even an experienced landlord is the fact that overall “housekeeping” outside of the building, can also be a problem.
Remember, “housekeeping” is basically what the property owner or property manager allows the tenant to do with the property while they are living there. It is important to define for every new tenant, what will be allowed and what will not be permitted. A prospective tenant could be a contractor who plans to store scaffolding, trucks, lumber, or cement blocks (for example) in the back (or front) yard of the house.
The standard AAR Lease Agreement for tenants requires the renter to maintain the property in a neat and undamaged condition, and comply with all city building codes and HOA rules and regulations. This form also mentions “clean and safe condition” as a requirement. Many property managers have a standard “addendum” that is added for all tenants and specifies what will be allowed and what will not. Here are some common problem areas:
Vehicles: Insurance companies want to insure a rental house, not a used car storage lot. Any vehicle that does not have current license plates or registration is an insurance liability. Inactive vehicles are classified as an “attractive nuisance” in the legal profession. Kids also like to play on or in them so a lawsuit against the property landlord is just an accident away. Almost all insurance companies will not allow vehicles that do not have current registration anywhere on the property. In addition, storage of vehicles in the front area and back yard are not permitted.
Other Vehicles: Motor homes, boats, utility trailers, camping, or travel trailers, are examples of other types of vehicles that are undesirable and may disqualify a home for insurance coverage.
Work Supplies and Tools: Buckets or cans of paint, bricks, cement blocks, fence materials, lumber, work vehicles, tractors, and large tools are additional examples of items that may disqualify a property.
Too often a tenant takes the attitude that they can do anything they want at their rental house. With that in mind, it is important to review your expectations and rules BEFORE a new tenant signs the lease. Additionally, the owner or property manager must perform regular inspections to confirm that all the required conditions are being followed.
In the end, rental houses that meet all the insurance company requirements generally bring higher rental income and resale prices.
* * * *CLARK SANCHEZ has been an Arizona insurance agent for 42 years and a Vendor-Affiliate with AZREIA for over 20 years. You can contact Clark if you have any insurance-related questions at firstname.lastname@example.org or (602) 803-2179.