Triplex Insurance: How it Works and What it Covers

Are you looking to invest in real estate with a triplex?

For most property owners, triplexes are large enough to reside in, while renting the other two units for rental income that could offset the property's mortgage.

Regardless of the purpose you have in mind when buying a triplex; there is one aspect of property investment you cannot afford to ignore – insurance.

That's where triplex insurance comes in. What is it, how does it work, and how can you get a policy specific to this property type? Keep reading to get the answers to these questions and more to help make sure that your triplex is correctly insured.

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What is Triplex Insurance?

Triplex insurance is a type of insurance coverage for multi-family residential real estate with three units under one property.

Most insurers provide these policies to protect property owners against damages from common perils like fire, smoke, wind and hailstorms, lightning, vandalism, and damages caused by burglars. In addition to these perils, which mainly affect the building's primary structure and other detached ones, most insurers will also provide liability and loss of use coverage.

The coverage you need for your triplex will depend on who is occupying the units at any given time. For example, is your property owner-occupied or tenant-occupied? Or, perhaps, you have decided to make one unit your primary residence while generating rental income from the other two units.

Let's take a closer look at how each situation works when it comes to choosing the right insurance policy for a triplex.

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Insurance for an Owner-Occupied Triplex

Is your triplex owner-occupied? It is not uncommon for triplex properties to be fully owner-occupied. Some families are large and prefer living under one building but in different units, albeit separated by a single or two walls.

This could be parents offering the extra units to their children, or extended family joining forces to become property owners. In cases like these, the entire triplex is usually considered owner-occupied, making the standard homeowners insurance one of the best forms of coverage.

Homeowners insurance is coverage for properties that are one's primary residence. It covers the property's primary structure, additional or detached structures like fences, garages, sheds, and their contents. It also provides liability and loss of use coverage, protecting you from financial damages due to negligence and living expenses if you have to move due to repairs from a covered loss.

There are several homeowner's policies to choose from with different features and options, running from HO-1 to HO-8. However, an HO-3 or named-peril policy is the most common homeowner's policy and would be ideal for owner-occupied triplex property. It offers coverage for the specifically mentioned perils. Coverage for the property's structure is typically provided on replacement cost value (RCV) basis and contents can usually be selected on an actual cash value (ACV) or RCV basis.

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How to Insure a Triplex That is Rented Out

When it comes to a triplex that’s being rented-out, the insurance rules change due to the occupancy. The triplex could be held entirely for investment purposes. In this case, you have tenants occupying all three units in the triplex. This, of course, makes your property tenant-occupied only. That's where landlord insurance or dwelling fire policy comes into play.

The most comprehensive landlord policy to have is the DP-3 coverage. Like the HO-3 policy, DP-3 will usually cover the triplex's structure, liability, and loss of use. If you are renting a furnished building with personal contents like furniture, carpets, and appliances, your insurer will add these as contents in your policy.

The loss of use under DP-3 pays landlords for lost rental income when the property becomes uninhabitable. Any personal content for the tenant is not covered under landlord insurance. Your tenants must purchase their own renter's insurance to cover their belongings. This coverage could also provide them with living expenses if they must move out of the unit during repairs or renovations.

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Cost of Triplex Insurance

Triplex insurance will be pricier than insurance coverage for a standard single-family residential unit. A triplex has more housing units, thus higher risk. However, your particular cost of insurance will depend on a few factors, including:

Location

The location of your triplex rental property can impact the cost of landlord insurance. For example, if your property is in a high-crime area, you may face a higher risk of vandalism and break-ins. As a result, your insurance premium may be higher than if your property were in a safer area.

Similarly, if your property is located in an area prone to natural disasters such as floods or wildfires, you may also face a higher risk of damage. As a result, it's essential to consult with an insurance broker to assess the risks associated with your specific location before purchasing a policy.

Use

Is your triplex owner-occupied or tenant-occupied? Owner-occupied units have lower insurance premiums than their counterparts. That’s because carriers often consider tenant-occupied properties a high risk since tenants are likely to be less mindful of the maintenance.

If your triplex is tenant-occupied, you could lower your insurance costs by moving into one of the units. This means you are on the property and can keep it in good condition.

Condition

There are a few reasons why an older or poorly maintained triplex will be more expensive to insure.

First, there is a greater fire risk, as older buildings often have outdated electrical systems. Second, there is a greater risk of water damage, as older buildings are more likely to have leaks in the roof or pipes. Finally, there is a greater liability risk, as tenants may be injured on the premises.

Fortunately, there are a few things landlords can do to improve the condition of their triplex and lower the cost of landlord insurance. For example, you can ensure that the building is up to code and has a valid certificate of occupancy. You can also regularly inspect the building for fire hazards and water leaks.

Firewall

A firewall is a wall that divides a building into separate units. It helps to prevent the spread of fire by containing it within one unit. Firewalls are typically made of concrete or brick and are usually at least four inches thick. They may also be constructed of other materials, such as gypsum board, metal, or glass.

Firewalls typically have openings that allow for the passage of utilities and cable TV wires, but these openings are protected with fire-stopping materials. They are an important part of any multifamily dwelling, as they help to protect occupants from the spread of fire. As such, firewalls can help to reduce insurance premiums for property owners.

Safety

There are a number of safety and security features a landlord can install in a triplex rental property to help keep insurance premiums lower.

For example, installing deadbolts on all exterior doors is an effective way to deter burglars. Adding smoke alarms and carbon monoxide detectors can help give tenants peace of mind and may even result in a discount on their insurance premiums. Finally, adding motion-sensing lights to the property’s perimeter can help deter would-be intruders.

By taking some simple precautions, landlords can help make their properties safer and more secure while also keeping their insurance costs down.

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Tips for Choosing the Right Triplex Insurance Policy

Here are a few tips to help you choose the right triplex insurance policy:

1. Make sure you understand your risks. Every landlord has different risks, so it's essential to understand yours before you start shopping for insurance. Talk to your agent about the type of property you own and what kind of tenants you have to get a better idea of the risks you face.

2. Know what coverage you need. Once you understand your risks, you can start shopping for a policy that covers them. Ensure you're clear on the coverage you need and how much you want.

3. Compare policies and prices. Not all insurance policies are created equal, so it's important to compare policies before making a decision. Make sure you compare apples to apples by looking at policies with similar coverages.

4. Read the fine print. Once you've found a few policies that look good, it's essential to read the fine print before making a decision. Ensure you understand what's covered and what's not, so you're not surprised if something happens.

5. Ask about discounts. Many insurers offer discounts for things like having a security system or being claims-free for a certain period of time. Ask your agent about any discounts that might be available to you so you can get the best possible price on your policy.

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Get an Instant Quote for Your Triplex

With so many property insurance options on the market, it can be challenging to find the right policy at the right price.

That's where Obie comes in. Obie provides insurance coverage for landlords in all 50 states and has insured more than $4 billion in property to date.

With the easy-to-use online platform, you can get instant landlord insurance for a triplex specifically designed for landlords and real estate investors who don't want to waste time with paper applications or agents.

On average, landlords are saving 25% with Obie. So get an instant quote from Obie today.

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