Let’s say you want to turn a home that you own into a full-time rental. What kind of insurance do you need to protect your home when the tenants live there? You need to understand liability of landlord insurance and homeowners insurance.
If it is a rental apartment, the landlord insures the property while the tenant is responsible for insuring the contents.
Regardless of whether you rent or own your home, the property – as well as its contents – should be protected by insurance. For home owners, home insurance can cover the house and its contents.
You will most likely need a landlord policy. However, if you only want to have tenants occasionally, home insurance may be more suitable.
Here are some factors to consider when deciding which type of insurance is right for your situation.
Insurance policies designed specifically for landlords provide additional protection for financial losses and obligations related to your rental properties.
While some landlords assume they can get their rental units covered with their standard homeowner insurance, homeowner insurance is usually not enough to cover an investment property.
Table of contents
Homeowner Insurance
Homeowner Insurance is taken out by the owner of the house. The sum insured usually covers both the cost of replacing the apartment in the event of a total loss as well as the personal items such as furniture, household appliances, clothing, jewelry and crockery contained therein.
If a home costs $200,000 to rebuild and the items in the house are $150,000 to replace, a homeowner who wanted everything covered would need to insure the property for at least $350,000.
Renter’s Insurance
Renter’s Insurance is intended for tenants who do not own the property but want to protect their personal effects that are in the apartment or on the property.
It is important for tenants to note that the landlord’s insurance does not cover them and their belongings in the event of damage or destruction.
The renter’s insurance policies reimburse the renter for replacement costs for property that is lost or damaged while in the property. It can also extend to means of transport and covers items stolen from your car or bike while stolen at work.
What is the difference between landlord and homeowner insurance?
Homeownerp insurance covers home ownership, while landlord insurance covers liability and damage related to apartments occupied by tenants.
Landlord and homeowner insurance
Both homeowner and tenant insurance require regular payments, usually either monthly or as a one-off annual payment, and a policy must be in place to be able to pay out in the event of a claim.
Both also require the payment of a deductible for damage, unless otherwise stated in the policy.
Depending on the insurance company you work with and the options you choose, your policy may consist of some or all of the following types of insurance:
Types of Insurance Coverage
Home insurance – covers structural damage to the rental property from things like fire, vandalism, or a broken water heater.
The more expensive home insurances also cover damage to appliances or equipment on the property and damage caused by malicious tenants.
Liability Insurance – provides coverage for costs related to injuries that have occurred to your rental property for which you are legally responsible.
Personal Property Protection – covers damage to your personal effects on the property (not those of your tenants) such as curtains or lights. This is especially important when renting out a furnished apartment.
Loss of income insurance – If damage has made your property uninhabitable and you can no longer collect rent from tenants; some policies allow you to receive the lost rental income for a limited time until it is rentable again.
However, most standard landlord insurance policies do not cover loss of rent due to an eviction or missed rental payments by tenants.
Flood Protection – In addition to covering residential buildings, specific flood protection can protect you from water damage caused by negligent problems with plumbing, rain or broken pipes.
Natural Disaster Coverage – Residential property coverage has additional restrictions on structural damage or total loss as a result of tornadoes, hurricanes, and earthquakes, so it is important to consider exposure to natural forces.
In such cases, depending on your region, you may need special protection to cover your property.
Legal protection – covers fees and costs for legal assistance if a tenant sues you or if you need legal representation in court because of rent owed or ignored eviction notices.
How to claim for renter property insurance
The process for making a renter property insurance claim is slightly different for every insurer. In many cases, the process may depend on whether your freight forwarder has an appraiser in your area or is outsourcing their claims to contractors.
When something happens and you need to file an insurance claim for the landlord, the process usually goes as follows:
- Damage Control: If something happens that causes damage to your home, you need to take action to stop further damage. For example, if water enters the house, do everything possible to stop it so that there is no additional damage.
- Notify the insurer: this may require a phone call or an online form to be filled out; once you’ve decided to file a claim, do so ASAP.
- Document the damage: Your insurer may require you to present photos of the damage and the area around the property before each clean-up so that they can assess the cause of the damage.
Some landlord insurance companies have mobile apps that you can use to make a claim and / or submit pictures, while others require physical records to document a claim.
When you purchase insurance, your specific claims process will be detailed in your insurance documents. It is important to read this information carefully so that you know what to do if a disaster occurs.
How Renter’s Insurance Protects Your Renter
Renter insurance and homeowners insurance do not cover your tenants’ personal belongings. For this reason, you should make rental deposit insurance a condition of your rental agreement.
Renting insurance can help protect your tenants’ property and also provide them with some liability coverage.
It’s a good idea to think about the risk of inviting paying guests into your home – and read your policy or check with your local representative to make sure you have the appropriate coverage – before welcoming long-term tenants mean.
Conclusion
A property owner is not required to insure their property unless there are special circumstances, but a homeowner who has a mortgage is usually required to take out insurance.
Often landlords stipulate in the rental agreement that tenants take out their own tenant insurance. Since you are insuring a larger property with homeowners insurance, the cost is likely to be higher than with rental insurance.
Liability insurance is also associated with most household and tenant insurance.
References
- Homeowners Insurance vs. Landlord Insurance for Rental – allstate.com
- Landlord Insurance vs. Homeowners Insurance – rentecdirect.com
- Homeowners Insurance vs. Renter’s Insurance – investopedia.com
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