property insurance

Are you in one of the following situations? Buying a new rental property? Or are you converting your primary residence to a rental property?

In both cases, you need to reassess your insurance policy. The regular homeowner’s insurance doesn’t work for rental properties, warns For rental units, you need to get the landlord’s insurance.

In this article, you’ll learn all about the landlord’s insurance, its common rules, and limitations.

Why do you need landlord’s insurance?

property insurance

Landlords insurance is what it is, it is designed for landlords. Homeowners coverage isn’t enough to protect your investment property. The regular insurance coverage has been created for owner-occupied homes. These policies don’t address damages from the tenant’s actions nor questions of liability.

The main challenge for landlords is the failure of regular insurance in covering rental properties. Once you have someone moving in, the homeowner’s insurance stops covering any losses. Therefore, your only option is getting a new policy.

You can call your insurance company and ask to switch your policy. Usually, it’s a straightforward procedure that doesn’t take much time. Keep in mind that the landlord’s insurance is more expensive. You can expect a price hike of around 15% to 25% compared to the homeowner’s policy.  This is not always the case, since you are no longer insuring your personal property, it can be less expensive.

Making the switch is vital. It’s not wise to delay the change in insurance policies. You never know ahead when something happens on your rental property. You could have an insurance case on your hands even on day one with your new renter.

What are the additional coverage areas?

You may opt for policy add-ons. These always come at an extra cost. The additional coverage options might include:

  • Natural disaster insurance
  • Rent guarantee insurance
  • Employer liability insurance
  • Landlord contents insurance

Landlords new to the business may expect the primary insurance to cover these aspects. But that’s not the case. Before signing any papers, make sure to include all the extra coverage areas you deem important enough.

What exactly impacts your insurance rate?

property insurance

Whatever the particular policy type, insurance policies factor in multiple variables to determine the final price. Here are some of the factors important for insurers:

  • The age of your property and wind mitigation features (i.e. impact doors/windows)
  • The type of property you own
  • The location of your rental
  • The number of rental units
  • Short-term versus long-term rentals

The calculation varies among insurance providers. Since the prices fluctuate wildly, it’s impossible to quote an average landlord’s insurance rate. Compare different insurance companies and find the best match for your rental property.

What if the rental property is your primary residence?

In most cases, having a rental property as your primary residence signifies short-term rentals. You have to check whether your regular homeowner’s insurance covers this. Many insurance companies cover temporary renters that stay for a weekend or more. At the same time, these companies might require prior notification about the short-term tenants.

However, having a variety of guests over regularly constitutes a business. And business activities aren’t eligible for coverage under homeowner’s insurance. Take the necessary steps to switch your insurance policy.

What if you want to rent out a single room in your home?

This is a complicated scenario because the eligibility varies from one company to the next. Some insurance providers cover renting out a single room, yet others won’t accept this. Your insurance company could factor in the number of people involved in the transaction and the duration of their stay.

But once you rent out your whole home for long-term tenants, the time is ripe for making the policy switch.

Does the landlord’s insurance protect your tenants?

No, your tenants need a separate policy called renter’s insurance. The difference is simple. Renter’s insurance will cover your tenant’s personal belongings. No normal landlord’s insurance comes with this protection.

Some landlords make the renter’s insurance mandatory. They require their tenants to opt for a renter’s insurance before signing any lease agreement. In this way, the landlords protect themselves from any future legal disputes.

What about the landlord’s personal items?

property insurance

There are landlord’s insurance policies that only cover items that help to service the property. For example, this can include snow blowers or lawn tractors – not sure about this sine we don’t have snow here and most people hire someone to cut their lawn. We customarily insure the landlord’s appliances. But any other items left behind won’t be covered by the landlord’s insurance nor the renter’s insurance.

The bottom line: insurance for your rental property

Your homeowner’s insurance doesn’t cover long-term rentals. Whenever you sign a lease agreement with new tenants, have a proper landlord’s insurance sorted out beforehand.

The prices of the landlord’s insurance vary wildly. The insurance companies account for many factors. These include the type, location, and age of your rental property.

Your landlord’s insurance won’t cover the tenants. Suggest them to get a separate renter’s insurance that covers their personal belongings in case of any accidents.