Building Insurance Coverage: What You Need To Know

Laura Olson
Dec 16, 2022

As a real estate owner, you need to know about building insurance coverage. Sure, you may have property or rental insurance for your tenants, but what happens if there's a huge windstorm or fire that damages the actual structure of your building?

That's where building insurance comes in—it covers damage to the physical structure of your property and any additional structures, including garages or fences. For example, if there's a severe hail storm that wrecks the roof of your building, without proper building insurance coverage, you could be left responsible for thousands in repair costs. On the flip side, having proper coverage could provide peace of mind knowing your expenses will be covered in an unexpected disaster.

This blog post will break down the basics of building insurance coverage so that you can make sure your property is adequately protected.

What Is Building Insurance Coverage?

Building insurance is a property policy that covers the cost of repairing or rebuilding your property's structure. It is most common among financed properties where lenders require borrowers to get enough coverage to cover the cost of their mortgage. 

Though not required, it's recommended to get building insurance for properties that aren't financed. Rebuilding can be expensive, and this type of coverage protects you from major out-of-pocket costs if something happens.

The level of coverage will depend on the type of insurance you buy. For example, the coverage could be named peril or all-risk. If your insurance is named peril, it will only cover damages caused by the covered events the insurer lists in the policy. On the other hand, an all-risk policy protects you against all events unless it is explicitly excluded. 

Generally, most insurance providers will insure your property against these events:

  • Fire
  • Smoke
  • Lightning
  • Vandalism, burglary, and theft
  • Falling objects, like trees, satellite dishes, and lampposts
  • Vehicular or aircraft collisions
  • Earth movements
  • Flooding
  • Subsidence (downward vertical movement of the ground the building sits on)
  • Frozen or burst pipes
  • Malicious damage

What Building Insurance Covers

Building insurance provides coverage against your property's primary structure and structures within the property. The most common detached structures covered in this policy include sheds, garages, and fences. Besides these, most carriers also cover fitted fixtures like:

  • Roof
  • Doors
  • Windows
  • Glass panes
  • Bathtubs
  • Glassware 

However, there is more to damaged property than the financial costs of rebuilding or repairing the structure. For starters, your building insurance might include the homeowner's liability if the property is your primary residence. This covers legal expenses and medical costs for a third party injured on your property.

Second, when a property is partially or wholly ruined, it usually leaves a lot of debris. Depending on the location and the amount of debris involved, the cost to clean up and remove could amount tohundreds or thousands of dollars. Your building insurance coverage might also cover the removal of debris. This saves you from footing the bill out of pocket or getting a separate debris insurance policy.

In addition, building insurance coverage might also include inventory and equipment. This is often the case for property owners with an apartment building where equipment is kept on-site or a fully-furnished short-term vacation rental.

What Building Insurance Doesn’t Cover

Most building insurance policies have specific exclusions, so it's crucial that you read through your carrier's policy and compare offers from different providers. That being said, most building insurance does not cover the following: 

  • Personal property and contents
  • General wear and tear
  • Damages due to negligence and failure to maintain the property
  • Damages from war events
  • Damages by pests, birds, and rodents
  • Leaking gutters
  • Property under construction

How Much Building Insurance Coverage Do You Need

How much building coverage you need will depend on the property's location, type of construction materials, size, and age. 

There are numerous cost calculators that can help you come up with this figure, also referred to as the sum insured. You can also search the Obie Risk Map to learn more about the natural risks in your area and be prepared with the right insurance for your rental property.

One of the best ways to determine how much you would need to rebuild or repair your entire building's structure is to work with a professional, like a contractor. Besides the property's size, location, and age, insurance companies also consider the cost of materials, labor, and professional fees for engineers, surveyors, and architects in your area. A professional considers all these factors, ensuring you get the most accurate amount. This helps you avoid being over-insured or under-insured.

Another option to consider is purchasing unlimited building insurance coverage. As the name suggests, unlimited insurance has no cap on how much you can claim for extensive damages to your property's structure. While it costs more than the standard building insurance policy, it could come in handy when you have a high-value property or are exposed to floods.

7 Tips for Finding The Right Building Insurance

The right insurance coverage allows you to run your real estate business worry-free. While getting the best coverage requires a little extra effort, these 7 simple tips will help make the task a little bit easier:

1. Decide on the level of coverage you need 

The first step in finding the right building insurance policy is to decide on the level of coverage that you need. 

Do you need comprehensive coverage that will protect your property against all eventualities? Or would a more basic policy suffice? 

Depending on the value of your property and the location, you may want to opt for a more comprehensive policy. 

2. Shop around and compare prices 

Once you know how much coverage you need, it's time to start shopping around and comparing prices from different insurers. Make sure to get quotes from at least 3-5 companies (if not using a broker who shops around on your behalf) to compare prices and coverage levels side-by-side. 

3. Read the fine print carefully 

When comparing building insurance policies, it's important to read the fine print carefully to know exactly what's covered and what's not. 

For example, some policies may not cover damage caused by natural disasters such as floods or earthquakes. It's important to be aware of these exclusions to make an informed decision about which policy is right for you. 

4. Consider a policy with a high deductible 

A high deductible means you will have to pay more out of pocket if you need to make a claim on your policy. While this may seem a disadvantage initially, it works in your favor because it helps keep premiums low. Just make sure you choose a deductible amount you can afford in case of an emergency. 

5. Consider adding riders to your policy 

Riders are optional additions to your building insurance policy that provide additional protection against specific risks such as flooding or terrorism. Adding riders to your policy will increase the premium, but it may be worth it depending on the risks associated with your property. 

6. Purchase sufficient liability coverage

Liability coverage protects you if someone is injured while on your property and decides to sue you. The liability coverage you need will depend on factors such as the value of your assets and the risks associated with your property. Be sure to purchase enough coverage to protect yourself in case of an accident or injury. 

7. Review your policy regularly

It's important to review your policy regularly - at least once per year - to ensure that it still meets your needs. As your rental property changes over time - say, if you add another unit or undergo major renovations - its insurance needs will also change, so it's important to stay on top of things.

Where to Find Building Insurance Coverage

As a landlord, you have a few options for finding building insurance coverage. For example, you could work with your current property insurance provider, research and contact individual insurance agencies, or use an online insurance broker like Obie.

While the first two options might seem simple, they often lack the detailed coverage and customization that Obie offers. Plus, using Obie's cutting-edge technology streamlines the entire process - no more spending hours on hold or filling out piles of paperwork. Additionally, having access to multiple carriers means that Obie can offer competitive rates and personalized coverage options that meet your specific needs as a landlord.

Visit the Obie website to get an instant quote today.