Why homeowners insurance usually isn't enough
Homeowners policies are built around an owner living in the home. When a tenant moves in, the risks change: more people coming and going, and a business relationship with someone living there. Many homeowners policies limit or exclude coverage for a home rented to others. A landlord policy, sometimes called a dwelling policy, is designed for that situation.
What landlord insurance usually covers
Policies vary, but most include some version of these:
- The dwelling: the structure of the rental home, for covered losses like fire or wind
- Other structures, such as a detached garage or fence
- Liability: if a tenant or guest is hurt and you're found responsible
- Loss of rental income, often called fair rental value, while the home can't be lived in after a covered loss
- Personal property you keep there for the rental, like appliances you supply
A lost rent example
This is a hypothetical example. A kitchen fire makes your rental unlivable for three months while it's repaired. You normally collect $2,000 a month in rent. Fair rental value coverage could pay the $6,000 in rent you'd lose, subject to your policy's limits and terms. The dwelling coverage would handle the repairs, minus your deductible.
What it doesn't cover
Your tenants' furniture, clothes and electronics aren't covered by your policy. Like most property policies, landlord policies also typically exclude flood and earthquake, which need separate coverage. Normal wear and tear and maintenance problems usually aren't covered either.
What to ask from tenants
Many landlords put insurance requirements in the lease. Common ones include:
- Renters insurance for the length of the lease
- A minimum personal liability limit that you set in the lease
- You listed as an interested party, so you're told if the policy lapses
Short-term and room rentals
Renting by the night or week through a booking site often needs different coverage than a long-term lease. Renting out a room in the home you live in is different again. In some cases a homeowners policy can be adjusted with an endorsement. Tell your agent exactly how you rent, so your coverage matches.
Adding more liability protection
Owning rentals adds ways to be sued. An umbrella policy can add liability coverage on top of your home, landlord and auto policies. Carriers usually require certain limits on your underlying policies first. CapCenter's in-house insurance agency can quote landlord, homeowners, umbrella and short-term rental coverage together.
