About Real Estate: How landlord insurance works

Owners who decide to rent their property out instead of selling it can't depend on their existing homeowners policy to protect the new rental.

DEAR DAVE: We are buying a new house but will rent out our current home to tenants. Do we need to buy "landlord insurance," or would any damage be covered by our existing homeowners policy?

ANSWER: The typical homeowners policy provides little or no coverage for any rental property that the policyholder owns. So yes, you'll definitely need to buy landlord insurance.

A standard landlord policy covers any physical damage to the property caused by fire, bad weather or criminal activity (such as arson). It also covers any additional buildings, like a shed or detached garage, as well any equipment that is kept there to maintain it.

Importantly, if someone gets hurt while living in the rental property or visiting it, the landlord policy can help cover the person's medical costs, attorney fees and possible court judgments or legal settlements.

Most policies also will help offset any loss of income if the property is rendered uninhabitable by tenants after a covered claim.

It's equally important to understand what the policy doesn't cover. It won't pay to replace, say, a broken dishwasher or worn-out roof: You would have to pay such costs out of your own pocket.

In addition, most landlord policies don't provide coverage for a tenant's personal possessions, such as furniture or electronics. That's why you should encourage the tenant to buy a renters insurance policy — or, even better, insist on it in the written lease agreement that both of you will sign.

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REAL ESTATE TRIVIA: U.S. fire departments respond to an average of 160 home fires that start with Christmas trees each year, according to the National Fire Protection Association (www.nfpa.org). They cause an average of two deaths, 12 injuries and $10 million in direct property damage annually.

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DEAR DAVE: Is it true that "Shark Tank" TV star Mark Cuban just bought an entire town in Texas?

ANSWER: Yes. Cuban, the multibillionaire who also owns basketball's Dallas Mavericks, recently disclosed that he purchased the entire 77-acre town of Mustang (population 23) about 60 miles southeast of "Big D," for what one observer says was about $2 million.

The town was originally put up for sale for $4 million about four years ago but failed to attract a buyer.

Cuban, 63, told the Dallas Morning News that he simply made the purchase to help out a friend who needed to sell it. "I don't know what, if anything, I will do with it," he added.

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DEAR DAVE: A few years back, you wrote about what it would be like to live in the North Pole. I wish I would have kept that column, because now my son is writing a report about the topic for his school's English class. Can you help?

ANSWER: Sure. But first you have to remember that there are actually three North Poles.

The "magnetic" North Pole is the one where the Earth's iron core makes the compasses we use point straight upward. It's in the area of Ellesmere Island, part of Canada's Northernmost territory, and has about 200 inhabitants — most of whom are either native-born persons, scientists or military personnel.

The "geographic" or "true" North Pole is about 310 miles higher up, making it the northernmost spot on our planet. It's sits on constantly shifting ice, so building a home or other permanent structure there is impossible.

No one lives on the geographic North Pole. Even if you could build a house there, you wouldn't want to because it has only one sunrise and one sunset each year. That means that you would live in various degrees of darkness 24 hours a day for six straight months at temperatures averaging 40 below zero, and then face 24 hours a day of unrelenting (but still freezing) sunshine for the following six months.

Your son is probably writing about North Pole, Alaska. Sometimes called the "Christmas North Pole," it's toward the eastern side of the state and is home to nine flying reindeer, Mr. and Mrs. Santa Claus and roughly 2,250 other residents.

Many of its citizens work in its thriving tourism industry, which is largely centered on the legend of Saint Nick.

The tiny community was founded about 70 years ago by a real-estate developer, who thought that toy manufacturers would flock to the area so they could stamp "Made in North Pole" on their products. But few companies took the offer, in part because temperatures in the winter average 9 below zero and can sometimes reach 40 below.

That's enough to freeze humans, not to mention toy-making machines.

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Our booklet, "Straight Talk about Living Trusts," explains how forming an inexpensive trust can help heirs quickly inherit your home and other assets after you pass away as well as settling any claims against your estate. For a copy, send $4 and a self-addresed, stamped envelope to D. Myers/Trust, P.O. Box 4405, Culver City CA, 90231-4405. Net proceed will be donated to the American Red Cross.

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