Insuring A Rented Home

If you're renting out a house, you'll need a rental property insurance policy, also known as landlord insurance, to protect your property and finances in the event of damage, loss, or legal issues. This type of insurance is necessary if you don't live in the home you're renting and is especially important if you're renting to multiple tenants or families. Landlord insurance covers damage to the building, appliances, and furnishings, liability claims, and loss of rental income, but it does not cover the tenant's belongings.

If you rent out a room, your homeowners policy will probably cover it

If you're renting out a room in your home, you might be wondering if your homeowners insurance has you covered. The answer is that it probably won't, as most traditional home insurance policies are not set up to cover room rentals. This is because your property is now a business asset, not a primary residence. However, it's important to check with your insurance provider, as different companies have different rules for what qualifies as a rental. For example, some companies may consider whether the person living in the rented room is a family member, whether the space has a separate entrance, and how the space is attached to the main structure.

If your insurance provider determines that your situation qualifies as a rental, they may suggest amending your current policy to cover the room rental or purchasing a new, more comprehensive policy. Keep in mind that your premiums may increase with your new policy if it includes a clause for the room rental. Another option to consider is obtaining landlord insurance, which is designed to cover rental properties. However, landlord insurance is mainly for traditional, long-term leases and may not be appropriate if you're only renting out a room in your home.

It's also important to note that if you're renting out multiple rooms or having a rotating number of guests, you may be considered to be running a business out of your home and would therefore need to purchase commercial insurance. Additionally, if you're planning on renting out your pool or storage area but not the house, you will likely need specific coverage for that as well. Overall, it's crucial to be transparent with your insurance company about your plans to rent out a room to ensure that you have the appropriate coverage in place.

If you don't live in the home you're renting, you may need additional coverage

If you don't live in the home you're renting out, you will likely need to purchase a landlord insurance policy. 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.

A landlord insurance policy covers the risks associated with owning a rental property and protects your rental income. It covers personal items, rental income protection, and the building of your rental property against specified perils. It also covers any other structures listed in your policy, such as out buildings.

The cost of landlord insurance is about 25% more than a standard homeowner's policy, with an average premium of $1400 compared to $1050 for a homeowner's policy. This is due to the increased risks associated with renting out your property, such as the potential loss of rental income and the increased liability posed by tenants and their guests.

In addition, if you provide certain items for your tenants' use, such as a lawnmower or snowblower, you will want to consider personal property insurance to cover these items. Your tenants will also need to purchase their own renters' insurance policy to cover their personal belongings, as the landlord's insurance policy does not cover these.

Finally, to ensure you have adequate coverage, consider purchasing umbrella insurance, which can extend the protection provided by your landlord insurance policy and cover any gaps. For example, if a tenant is injured on your property and the medical bills exceed what your liability insurance will pay, an umbrella policy can help cover the excess.

If you have a mortgage on your home, your lender will require insurance

If you have a mortgage on your home, your lender will require you to have homeowners insurance. This is to protect their investment in your property. The amount of insurance you need will depend on the replacement cost of your home, which is calculated based on the square footage, local building cost data, type of home, and purchase price. Most lenders require that you insure your home for 100% of its replacement cost, so it can be completely rebuilt in the event of a disaster. Some lenders may only require coverage equal to the unpaid portion of your mortgage balance, but this could leave your home underinsured.

Your lender will likely have specific "scope of coverage" requirements, detailing what must be covered by your insurance policy. At a minimum, your policy will need to cover wind, hail, fire, and vandalism. If you live in an area that is likely to flood, your lender may also require you to purchase flood insurance. Similarly, if you live in a region vulnerable to seismic activity, your lender may require earthquake coverage.

It's important to note that homeowners insurance is different from rental property insurance or landlord insurance. If you are planning to rent out your home, you may need a different type of insurance policy, depending on the length of the rental period and whether it is a long-term or short-term rental. Standard homeowners insurance policies do not typically cover losses incurred while your home is being rented out, nor do they cover business activities conducted in the home.

If you rent out a property, you'll need a rental property insurance policy

Rental property insurance covers physical damage to the building caused by problems listed in the policy, such as wind, fire, and hail. It also includes liability coverage, which protects you financially if you're found legally liable for someone else's medical bills or property damage related to the rental. This liability coverage will also cover your legal defence if you're sued, up to the limits of your policy.

Additionally, rental property insurance can cover any items you own at the property for tenant use, such as appliances or lawnmowers. Some policies also offer loss-of-rental-income coverage, which protects you if you're unable to rent out the property due to damage caused by a covered peril. However, it's important to note that rental property insurance does not cover the tenant's personal belongings or the cost of evicting a tenant.

The cost of rental property insurance is approximately $160 per month for long-term or seasonal rentals. If you only rent out your property occasionally, you may be able to add coverage to your existing home insurance policy instead of purchasing a separate landlord insurance policy. On the other hand, if you frequently rent out your primary residence, it's considered a business, and you'll need to look into commercial property insurance or home-sharing insurance.

Landlord insurance covers damage to the building, appliances and furnishings

Landlord insurance is designed to protect your income and property in the event of tenant-related damage, certain disasters, and liability claims. It covers damage to the building, appliances, and furnishings.

For instance, if you left a lawnmower at your rental house and it was damaged by a fire, your landlord insurance would cover the cost of repairing or replacing it. However, if your tenant bought an air conditioning unit and it was damaged by the same fire, their appliance would not be covered by your insurance.

Landlord insurance also covers any personal property you may leave on-site for maintenance or tenant use, such as appliances, lawnmowers, and snow blowers. It also includes liability coverage, so if a tenant or one of their guests gets hurt on the property, it would cover legal fees and medical expenses.

Most landlord policies also provide coverage for loss of rental income if you are unable to rent out the property while it is being repaired or rebuilt due to damage. This coverage is generally provided for a specific period of time.

Frequently asked questions