Buying and managing a rental property can be an excitingendeavor.

Owning an apartment or condo building can provide supplementalincome or even allow you to change careers completely. Owningrental property can be an incredibly rewarding experience thatprovides for a very flexible lifestyle.

But with many rewards comes a fair amount of risk.

To cover your bases and reduce your exposures as a propertyowner you must, of course, get property insurance to protect youand your tenants from loss. However, property insurance can besomewhat limiting. It's important to understand exactly what theinsurance covers. But even more important is understanding whererisk still lies, and how you can combat it.

There are three potential risks you should be aware of if you'rea building owner:

1. Tenant discrimination

Get to know tenant discrimination laws before you seek rentersfor your building.

The Fair Housing Act of 1968 and the Fair Housing Amendments Actof 1988 detail that property owners and managers can't discriminateagainst or deny potential tenants from a rental unit based on race,religion, national origin, familial status, age, disability orgender.

In each of the past several years, nearly 9,000 discriminationcomplaints were filed, with disability discrimination complaintstopping the list.

While almost half of these complaints are dismissed each year,there are a number of cases that land in federal court with awardsto the plaintiffs averaging over $50,000.

Even if a current renter or a prospective tenant files acomplaint against you as a property owner and it's later dismissed,you must still pay attorney, court and other legal fees.

Property owners should ask their business insurance brokersabout Tenant Discrimination Liability insurance, which protectsfrom lawsuits and can offset the high cost of attorneys' fees.

With so much emphasis placed on property coverage and generalliability, Tenant Discrimination coverage is often forgotten aboutor dismissed as unimportant. This protection is a relativelyinexpensive and easy to obtain, and should be considered by everymulti-family unit owner.

Continue reading …

Does your rental property have aluminum wiring? If so,you'll need to take some steps to avoid the fire hazard theycreate. (Photo: iStock)

2. Aluminum wiring

In the 1960s and 1970s, copper prices rose significantly,creating a problem for builders who used copper wiring in housing.Builders replaced copper wires with similarly conductive aluminumones, but electrical terminals that weren't updated to connect withaluminum wires created a serious fire hazard.

If you own a building with aluminum wiring, your insurancecarrier will want to know. They'll likely request that youremediate the aluminum wiring to eliminate the fire hazard and meetunderwriting requirements. While completely rewiring a building isthe foolproof solution, most carriers will allow building owners touse switches and converters that create a safer connection betweenaluminum wires and copper terminals.

Some insurance carriers will still consider covering a buildingthat hasn't solved for this wiring issue, but that also comes at aprice. You'll likely see premiums that are significantly higherthan policies from the same company for buildings with remediatedwiring.

3. Tenant cooking accidents

As a property owner, you know that you can do everything in yourpower to protect your building, but in the end, most claims stemfrom something a tenant has done. And most of those issues start inthe kitchen.

An unattended pot, some cooking oil and a gas range make adangerous combination. Of course, a standard property policyprotects the building owner against loss because a fire. But theremay be additional costs not covered by insurance, including apricey deductible.

To lower risk and prevent kitchen fires in the first place,property owners can use stovetop fire suppression devices thatautomatically release extinguishing powder if a flame erupts fromthe stove and is high enough to reach the hood. These systems are asafe, inexpensive way to reduce the risk of fire damage to anapartment or condo unit or worse, the entire building. Someinsurance companies will even offer a discount for installing andmaintaining these devices.

As a property owner, the last thing you want is to be completelysurprised by an incident that isn't covered by insurance. You canavoid being blindsided by working closely with your broker tounderstand all of your potential risks.

Greg Howson is a property and casualty consultant for MountLaurel, N.J.-based Corporate Synergies, an employee benefits andproperty and casualty insurance brokerage and consultingcompany.

Related: Calling all landlords: Be sure snow removal is doneright!

Have you Liked us on Facebook?