You Own Rental Property – Do You Need Basic Home Insurance?
Owning rental property can be a challenge. Many people do not realize there are several types of home insurance to cover this situation. Having the right coverage is essential. A basic home insurance policy is enough in some situations, but not all. What type of insurance do you need if you plan to rent out a single-family home?
How Long Is the Rental Agreement?
A deciding factor in the type of insurance you need comes down to the length of the time you plan to rent it. Some people may rent out a home only for a short period of time.
For example, there may be a big event happening in your city. You want to rent out your home to those visiting for a few days or a week. In this case, a basic home insurance policy is generally enough. Let your home insurance agent know about your plans. Discuss your policy limitations. Talk about options for extending your coverage. For example, you might need extended liability coverage during this time.
If you plan to rent your property long term, you need landlord insurance. This policy is similar but provides for more specialization of the policy. Under a landlord insurance policy, you gain coverage for your investment in the home. This includes your structure, assets and any liabilities associated with it. Most landlord policies do not cover the tenant’s property and liabilities.
What Does Landlord Insurance Do for You?
When renting out a property long-term, a standard home insurance policy will not be applicable. You generally cannot get this policy if you do not live in the home. However, landlord coverage can full this gap. A landlord policy is like home insurance in covering you from instances such as:
- Damage to the building itself, such as from fire or lightning strikes
- Property coverage only for items you own and use in the property, such as on-site furnishings
- Liability coverage for the property, like when you are responsible for a tenant’s injury in the home
If an event occurs, damaging the tenant’s belongings, it is unlikely you will have coverage for this. Rather, the tenant should consider renter’s insurance to cover this type of loss. It is not your responsibility to cover tenant property. Some property owners make this a condition of their contract with the tenant.
Work closely with your home insurance agent. Find out if your rental terms apply to a basic home policy or a landlord policy. Knowing the difference is essential to protecting your investment.