Renting A Home? Here's Why You Need To Review Your House Insurance

If you're renting out your entire house, you'll need to switch your homeowner's insurance policy to landlord insurance. This is because your property is now a business asset, not a primary residence. Landlord insurance covers the building against damage, as well as any personal property you leave on-site for maintenance or tenant use. It also includes liability coverage, for example, if a tenant or their guest gets hurt on the property. It's important to make this switch before any new renters move in, as your homeowner's insurance policy will likely have a clause that terminates coverage if you rent out your home.

If you're renting out a room in the property you live in, this will also affect your insurance. Most traditional home insurance services are not set up to cover room rentals, so you'll need to meet with your broker to discuss your options.

Landlord insurance

If you're renting out your home, you'll need to swap your homeowner's insurance for landlord insurance. This is because your property is now a business asset, not a primary residence, and most homeowner insurance policies do not cover homes used as rental properties.

Property Protection

Property protection helps cover physical property related to the home you're renting out. This may include the dwelling itself and equipment you keep on-site to help maintain it. Coverage generally includes:

• Dwelling: This helps pay to repair your rented home, condo, or apartment if it's damaged by fire, lightning, wind, hail, or other covered losses.
• Other structures: This helps pay to repair detached structures on your rental property, such as a detached garage or fence, if they're damaged by a covered loss.
• Personal property used to service the rental: If you leave a lawnmower or snow blower on-site to maintain your rental property, landlord insurance may help cover this equipment if it's damaged. However, personal items like your bike or DVD player are not usually covered.

Landlord Liability Protection

The liability portion of landlord insurance may help you pay for another person's medical bills or your legal expenses if someone is injured on your property and you are found responsible. For example, if your tenant falls down the stairs due to poor maintenance, your landlord liability coverage may help pay for their medical and legal costs, up to your policy's limits.

Extra Landlord Coverages

Depending on the location and condition of your rental, you may want to consider adding some optional coverages to your landlord policy, such as:

• Vandalism: This can help pay to repair vandalism damage, which is typically not covered by a traditional landlord policy.
• Burglary: A standard landlord insurance policy may help pay to repair damage caused by burglars, but an optional endorsement can add coverage for all damage caused by illegal entry, as well as damage to personal property.
• Building codes: If you're repairing or replacing part of your rental, you may be required to upgrade items like wiring or ventilation to meet current building codes. This coverage can help reimburse you for those additional costs.
• Flood insurance: Essential if your property is in a flood-prone area.
• Umbrella insurance: Offers extended liability limits.

Cost of Landlord Insurance

The cost of landlord insurance depends on various factors, including the location, age, size, and condition of the property, as well as the amount of coverage needed and any additional coverages. On average, landlord insurance is about 25% more expensive than homeowners insurance, with an average premium cost of $1,400 compared to $1,050 for homeowners insurance.

Tips for Reducing Landlord Insurance Premiums

• Ask tenants to have renters insurance: This can help protect your investment if there's an accident or damage.
• Invest in weather-resistant materials: In areas with severe weather conditions, investing in stronger shingles or metal roofs can help lower insurance costs.
• Choose a bigger deductible: Opting for a higher deductible can result in lower regular payments.
• Keep your property well-maintained: Regular check-ups and maintenance can help avoid potential risks and issues.
• Upgrade the property's security: Installing modern security features like surveillance cameras and secure gates can help reduce insurance premiums.

Rental home policies

If you're renting out a home, you'll need to take out a specific rental home policy, also known as landlord insurance. This is because standard homeowners insurance policies do not cover losses incurred while your home is rented out.

Most policies also include liability coverage, which pays for lawsuits against you or things that are your fault. For example, liability coverage protects you if your tenant sues you because they had an accident on the property.

You can also take out additional coverages, such as flood insurance, to further protect your property.

Rental income protection

If you're renting out your home, you'll need to switch from a homeowner's insurance policy to a landlord insurance policy. This is because your property is now a business asset, rather than a primary residence.

Landlord insurance policies typically include coverage for the building and additional structures against specified perils, as well as coverage for personal items used to maintain the property that are kept on-site. They also include liability coverage, which covers legal fees and medical expenses if a tenant or one of their guests gets hurt on the property.

Most landlord insurance policies also offer rental income protection, which covers lost rent payments if the property is temporarily uninhabitable after a covered claim. For example, if your rental property incurs damage from a natural disaster, your tenant will have to move out while you repair the property. During this time, your tenant likely won't be paying you rent, but rental income protection will cover the lost rent payments. This coverage is usually available for up to 12 months.

It's important to note that landlord insurance does not cover your tenant's personal belongings. Your tenants will need to purchase their own renters' insurance policy if they want their belongings covered in the event of an incident.

Tenant's personal possessions

When renting a house, tenants' personal possessions are their own responsibility. Landlord insurance does not cover a tenant's personal belongings, so tenants are encouraged to get their own renters' insurance policy to protect their possessions in the event of damage or theft. This is a separate policy from home insurance, which covers the building structure and any belongings the landlord keeps on-site for maintenance or tenant use.

Tenants' possessions are defined as anything they own or purchase, including items stored in shared spaces such as the garage, attic, basement, yard, or porch. Landlords cannot seize or dispose of tenants' property while they are still living in the rental unit, except in specific circumstances, such as an unpaid bill or unauthorised vehicles. Even in these cases, there are legal procedures to follow, and the landlord must notify the tenant and give them a chance to rectify the situation.

When a tenant moves out, they are required to take their personal belongings with them. However, it is not uncommon for landlords to find that tenants have left some possessions behind. In such cases, the landlord becomes an 'involuntary bailee', responsible for the safe-keeping of the items. The Torts (Interference with Goods) Act 1977 outlines the steps landlords must take, including making reasonable efforts to contact the tenant and giving them notice before disposing of the goods. The landlord can also sell the goods to recoup any reasonable costs incurred through storage, removal, and sale, returning any excess funds to the tenant.

To avoid disputes, landlords can include an abandoned property clause in the lease agreement, outlining the tenant's responsibilities regarding their belongings and the consequences of not retrieving them. It is also recommended to screen tenants thoroughly and set clear expectations for move-out procedures.

Insurance endorsements

If you're renting out your entire home, you will need to switch from a homeowner's insurance policy to a landlord insurance policy. This is because your property is now a business asset, not a primary residence.

Now, onto insurance endorsements. An insurance endorsement, also known as a rider, is a change to your insurance policy that adjusts your coverage. Endorsements can be used to add, remove, or alter your coverage, or make adjustments like changing your address. They can be added at the time of purchase, during your contract term, or when you renew.

• Scheduled personal property endorsement: This endorsement adds coverage for valuable personal items, like jewelry, art, or collectibles.
• Flood coverage: If you live in a high-risk area, adding flood coverage to your policy can protect you in case of disaster.
• Earthquake endorsement: Earthquake endorsements can help cover costs associated with earthquake damage, including necessary living costs while your home is being repaired.
• Identity theft endorsement: This endorsement can help cover costs brought on by identity theft, including ID replacement, fraud services, or associated legal fees.
• Additional insured endorsement: This endorsement adds coverage to another person under the primary policyholder. This is often used in real estate when landlords require tenants to add coverage to their renters' insurance.
• Home business endorsement: If you run a small business out of your home, this endorsement can provide coverage for damaged or stolen work equipment or supplies, as well as business-related liabilities.

You can request an insurance endorsement by contacting your insurance agent or company. They will be able to help you determine the appropriate coverage for your situation.

Frequently asked questions