Do I Need to Insure My Rental Property Differently?

Mar 16, 2020 | Personal Insurance

When you are already insured with a Homeowners Insurance, it will be totally understandable if this question will pop into your mind. Because why do you need to have separate insurance to your rental place? What’s the difference? 

Landlord Insurance or Rental Property Insurance covers the inevitable risk of renting your house or condominiums in a long period of time. It may have a lot in common with Homeowners Insurance, but Rental Property Insure has some unique features which the Homeowners Insurance lacks. Rental property insurance cost is approximately 25% more expensive than a homeowner’s insurance policy. The nationwide average for rental property insurance is about $1,350.  It may costs you more than a standard homeowner’s insurance, but what’s important is that you are properly covered. Homeowners Insurance in most cases cannot be a substitute for Rental Property Insurance. Though many might want to just stay to their old insurance, this way of thinking is such a gamble. Imagine you are letting other people use your property. They may not be as concerned or careful as the owner when it comes to taking care of your house.

Homeowners Insurance Vs. Rental Property Insurance 

Rental Property Insurance coverage will vary (Yes, Just like Homeowners Insurance) Generally they do also cover Dwelling, Contents and Property Belongings and Liability Coverage. But what Rental Property Insurance has that Homeowners Insurance doesn’t, is the “ Loss of Rental Income “ which is very important to your business. Having some income from your property’s rent is the very reason why you even started putting your house for lease right?  

Loss of Rent Coverage

Automatically your tenants don’t need to pay the rent once they are no longer living in your rental property. This coverage protects you against loss of rent in case your property was considered uninhabitable after it got damaged from a qualified kind of peril. Most insurers can provide the amount of monthly rent in a maximum of 12 months. Though this policy doesn’t always come with standard rental property insurance. So make sure to check your policy thoroughly before purchasing. 

Dwelling Coverage

When it comes to Dwelling Coverage there is not much difference between the two insurances. Just like homeowners insurance, rental property insurance covers any damage caused by a qualified peril to your house. Such as fire and lightning damages,  these perils are normally covered by your policy.  

Landlord’s Personal Property

Landlord’s Personal Property coverage covers the landlord’s personal property only.  It means if the landlord left some appliances in the rental house for the renter to use like washing machine, stove, oven and vacuum cleaner. And let say a fire damaged them all,  those appliances will be covered. It’s because fire mostly is one of the qualified perils included in the coverage. However, in some, this coverage is not always included in Rental Property Insurance. That’s why it’s vital for you to be vigilant when choosing insurance companies. Better ask them about this policy,  ask if it is already included or not. Other Insurers offered this as an optional add-on called “ Endorsement “ 

Liability Coverage

Liability Coverage will protect you from any lawsuits when someone got injured inside your rental property. For example, A tenant brought a few friends to your rental house.  Then an accident happened. Aside from possible lawsuits, you are also responsible for their medical needs. Liability coverage includes all of these and can even cover up to your policy limits. If worse comes to worst that your policy limit is still not enough to cover everything. You can purchase Umbrella Insurance. But we need to be clear about this policy. Umbrella Insurance is just a secondary coverage. Which means your Rental Insurance is your primary. You can only use Umbrella Insurance after you reach the liability coverage limit of your primary insurance. So if you’re your limit is $250,000 (in liability coverage) and someone filed a lawsuit and successfully sue you for $500,000 in damages. That $250,000 limit should be used first then the remaining $250,000 will be paid by your Umbrella Insurance. If in any case and this happened without you having an Umbrella Insurance added in your policy, then you are the one who should pay the remaining $250,000 from your own pocket! 

When to Buy and Not to Buy a Rental Property Insurance 

How long are you planning to make your property for lease? This is the factor you need to think of before you can determine if you need to purchase rental property insurance or not. Because it always depends on how long you intend to lease your house.  The type of insurance you need depends on the frequency and duration your tenants will stay. Here are the three categories:

  • Long-term renting: This is when you need to purchase rental property insurance. It is applicable to your properties like a rest house,  vacation home or second home where you intend to rent to a person or family for a long period of time. When you say long period of time it means six months or more.  Having other people living in your house has a high risk of inevitable accidents. They may bring some visitors from time to time. And if something happened to them inside your property at least you are at ease that the damages or injuries will be covered.
  • Infrequent short-term renting: If you just want your property to be for lease for a short period of time like a couple of weeks.  Then you might just keep your homeowners’ insurance. But make sure to talk to your insurance agent about it before you go ahead and let someone rent your house. Most standard homeowner’s insurance coverage covers this. Just let your insurance agent know that you want to extend the usual benefits of homeowners insurance while you are renting your property. If in any case that this cannot be done in a standard homeowner’s insurance then you may purchase an endorsement. This endorsement is to extend your coverage to temporary rentals. 
  • Frequent short-term renting: It is considered frequent-short-term renting if you intend to rent out your property for a short period of time to different people. This may be for a week or less than that.  In this case, homeowner’s insurance neither rental property insurance cannot cover your house. This set-up will be considered a business. Therefore, commercial property insurance is what you need.

Need Help?

Should you be in need of any assistance regarding Home Insurance or Renters’ Insurance, don’t hesitate to contact us! We’d love to hear from you.

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