What Type of Insurance Do You Need for Your Rental Home?

27
February 2018
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Ready to rent your home? Whether you’re considering a short-term, home-share activity to earn a bit of side-income or you’re ready to be a full-time landlord to an investment property, your insurance needs are about to change.

Before you list your home on any website as available, be sure you understand what’s covered by your insurance policies… and what’s not.

What Kind of Insurance Do I Need for my Home-share Rental?

Thinking of renting out your home as an AirBnb? Be sure to talk to your insurance agent before you host your first guest.

Home-share programs are rising in popularity but these short-term rentals bring some interesting insurance issues along with the extra spending cash they generate.

Your homeowners’ insurance most likely won’t cover your home against damage or theft if you’re renting it out as a home-share.

That is because homeowners insurance policies are generally not designed to cover accidents arising from short-term property rental. If your policy contains a specific home-sharing or rental exclusions, your insurance company may deny coverage for any resulting claims.

What’s more, homeowners’ policies usually exclude or provide limited coverage for homeowners who are running a business in their home. And your short-term rental/ home-sharing platform activity could be defined in the policy as a home-based business. Most policies contain a business exclusion that eliminates liability coverage for activities related to business activities. Which means you could be responsible for the out-of-pocket expense if a guest is injured or damages property during their stay.

Landlord insurance, also called rental insurance or dwelling policies, are a better solution for protecting your home-sharing or short-term rental activities. This policy can protect non-owner occupied buildings (rentals) against damage to the home’s structure, as well as fixtures, appliances, and equipment stored on the property.

This type of coverage may not be enough to protect your personal property and furnishings, however. You may need an additional endorsement to be sure your favorite couch or expensive media equipment is covered. And be sure your policy includes personal liability coverage in the event a guest is injured while staying in your home.

What Insurance Do I Need for a Vacation or Investment Rental?

If you’re ready to rent out your home as a vacation or investment property, there’s no question about the type of insurance you’ll need. A landlord’s policy will protect your house or unit against structural, fixture, or appliance damage from covered perils.

Rental insurance generally protect your financial investment in your rental property if damage occurs from fire, lightning, wind, hail, ice, or snow. But you may need additional coverage against flooding, earthquakes, or other commonly excluded perils.

Most rental insurance policies will provide liability coverage against third-party injuries or property damage, and some even include loss-of-income coverage if you’re unable to rent out the property while it’s being repaired or rebuilt after a covered loss.

Should I Require Rental Insurance From My Tenants?

Rental insurance policies are designed to protect you, the landlord, from financial loss when you’re renting out a home. They generally will cover the home itself, as well as the fixtures and appliances inside. You can even add endorsements to cover any furniture or personal possessions that you include in your rentals.

But a landlord insurance policy isn’t designed to cover the property of your tenants.

If a fire broke out in your rental property, for example, your rental insurance would typically cover the costs of repairs, rebuilding, and replacement of the home, appliances, and even your carpets. But your tenants’ belongings - clothing, furniture, media equipment, draperies, and more - typically wouldn’t be covered by your policy.

That’s why many landlords require renters carry their own renters insurance policies. Renters insurance protects tenants’ property in the event of a loss from a covered peril. Renters insurance can also include liability and medical expense coverage in the event a visitor is injured.

Rental insurance is designed to protect landlords, and renters insurance is designed to protect tenants. When you’ve got both in play, you can be sure that your rental property is fully protected: from the structure of the home or unit itself to all of the people and possessions that reside within it.

If you’re ready to rent your home out as either a short-term home-share rental or a long-term vacation/ investment property, be sure to talk to your insurance agent. When your home transforms from your primary residence to an income-earning venture, your insurance needs are going to change, as well.

 

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