Does Homeowners Insurance Work for a Rental Property?
Whether it be for a short-term or long-term basis, there are many reasons why property owners might want to rent out their home. However, like all risks, you want to make sure you’re properly covered from any unforeseen events. You might be wondering, does standard homeowner’s insurance work for rental property? In most situations, your standard homeowner’s policy will deny coverage to your rental property, which is why it is important to understand the difference between a homeowners’ insurance policy and a dwelling insurance policy, also commonly referred to as a “fire policy” or “landlord insurance policy”.
Factors To Consider When Determining What Kind of Rental Property Insurance is Appropriate for Your Situation
- Length of Rental Agreement– If you’re renting out your home for a short period of time, there are certain circumstances where your existing homeowners insurance insurance will provide enough protection. If you’re planning on renting out your single family home on an ongoing basis, then landlord insurance might be a better fit for your risk.
- Do You Reside in the Home? – Purchasing homeowners on a home that isn’t owner occupied is, in most situations, ineligible with most insurance companies. An agent can help you better understand these scenarios. With that being said, if you do reside in the home you’re renting out, there are endorsements available on your standard homeowners’ coverage to better protect yourself, like ‘unit rented to others’.
What Is Dwelling Insurance?
Dwelling insurance is the best way to cover a home, apartment, or condo that is occupied by a tenant.
In addition to solving the “where you reside” issue, it also saves you money by stripping out unnecessary coverages (i.e. coverages that are more appropriately provided by the tenant’s renter’s policy).
To save you money, landlord policies reduce coverage for:
- The contents of the residence.
- Liability insurance.
And to better protect your interests in your property and your rental income, a dwelling policy may add coverage for:
- Loss of rental income.
- Damage caused by tenants.
What does Dwelling Insurance Cover?
Dwelling insurance is similar to homeowners’ insurance, in the sense it protects the
structure itself from damages in which occur from an unforeseen event. However, there are certain coverages included in standard homeowners’ policy you might not need; and coverage included in a landlord policy that aren’t included in your homeowners. Landlord insurance includes:
- Property Damage– Damages to your buildings and personal property as a result of fire, storm damage, theft, vandalism, and tenant damage.
- Personal Property– Whereas homeowners’ insurance includes a higher amount of coverage for your personal belongings, such as furniture, clothing, and jewelry; landlord insurance allows you to obtain personal property coverage only on items used to service the rented property.
- Liability Insurance– Whether a tenant, visitor, or even a trespasser is injured on your rental property, liability coverage protects you from claims and lawsuits and it is necessary to carry high liability limits on a landlord policy than on your standard homeowners policy.
- Loss of Income- If your rental property were to become uninhabitable due to a covered loss, coverage for loss of income will reimburse you for the loss of income, including rent, that you could possibly sustain.
- Optional Coverage- As a landlord, there are optional coverages you might need to make sure you are fully protected. This includes; rent guarantee insurance, natural disaster insurance, employer liability insurance, and landlord contents insurance.
Does My Landlord Policy Cover the Tenant’s Belongings?
No. However, you should push your tenants to purchase a separate renter’s policy to cover their belongings while residing in your dwelling. While there is no federal or state law requiring a tenant to have renters’ coverage, as the property owner, you can require it in your lease agreement. A renters’ policy will also provide them with liability protection if somewhere suffers an injury or property damage due to the renters’ negligence.
Is Landlord Insurance a Tax Deductible?
Yes. Because being a landlord is a business endeavor, purchasing landlord insurance can
be considered a business expense, therefore, you can deduct insurance premiums
you pay on a landlord insurance policy.
Where Can I Purchase a Landlord Policy?
The best way to guarantee you are purchasing the insurance you need for the best price, is by contacting an agent who has access to multiple insurance companies. Austinsurance is able to compare prices and customize your coverages to meet our needs.
To get information, advice, and to find the right coverage to match your needs, contact Austinsurance today! Our agents will guide you in the right direction with a free insurance quote, finding the right policy that makes the most sense for you!