Friday, August 12 2022

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If you own one or more properties that you rent out, you probably need rental insurance.

Here’s what rental property insurance is, what it covers, and whether or not you need it.

What is rental property insurance?

Rental property insurance, also known as landlord insurance, covers the risks associated with renting your property (house, apartment, condominium, etc.) to third parties. It can provide financial protection in case your property is damaged or someone is injured on your property.

Depending on the policy you purchase, rental property insurance can also protect your rental income if the property becomes uninhabitable due to a problem listed in your policy.

If you are considering renting out your property, it is important to check what coverage, if any, is available from your existing home insurance.

What does rental property insurance cover?

Rental property insurance often includes the following coverage.

Housing cover

This covers physical damage to the building caused by issues listed in your policy, such as wind, fire and hail.

Liability coverage

Liability insurance protects you financially if you are legally responsible for someone else’s medical bills or property damage related to the rental property. It will also cover your legal defense if you are sued, within the limits of your liability coverage.

Personal property

If you own any items in the property that tenants may use, such as appliances or lawnmowers, they may be covered by a rental property insurance policy. Some insurance companies offer this coverage as an option.

Loss of rental income

If you cannot rent your property for a period of time due to loss caused by a problem mentioned in your policy, such as a fire, the loss of rental income may be covered. This coverage is also offered as an option by some insurance companies.

What does rental property insurance not cover?

Some expenses will not be covered by rental property insurance.

Tenant’s personal property

If your tenant’s personal property is damaged, it is not covered by rental property insurance. Renters must have their own renter’s insurance to cover their personal effects.

Equipment maintenance or failure

Things break sometimes. But if the water heater in one of your rentals fails, you’ll likely have to pay out of pocket for repairs or a replacement.

Shared ownership

Roommates, such as renting a spare bedroom or a floor of your home, are usually not covered by a rental property insurance policy. Rental property insurance is for property that is not occupied by the owner.

Damage caused by flood or earthquake

These catastrophes require their own separate insurance policies.

If you live in an area prone to such natural disasters and rent out your primary residence, you may already have separate earthquake or flood insurance for your home.

Optional rental property insurance coverage

Certain situations are not usually covered by rental property insurance, but you may be able to add them to your homeowner’s insurance policy, such as:

Vandalism

If your property is intentionally damaged or vandalized, the damage is usually not covered by a standard property insurance policy. Some insurers offer vandalism coverage as an option with purchase.

Heist

Rental property insurance can cover damage to your property in the event of a break-in, but it usually won’t cover stolen items. You may be able to add coverage for items used to maintain the property, such as a lawn mower or appliances, for an additional fee.

Property under construction

If your property is under construction, you may be able to purchase special coverage for the structure until it is ready for tenants.

building codes

If you need to make repairs to a property, you may need to make some updates to comply with new building codes. You can sometimes buy coverage to reimburse you in these situations.

personal injury

This coverage can help you if you are sued for wrongful eviction.

Do I need insurance on my rental property?

Insurance for short-term rentals

If you only rent out your primary residence occasionally, you may not need rental insurance.

For example, maybe you go away a few weekends a year and rent out your primary residence during those times. In this case, your home insurance policy may cover you in the event of damage to your home while you are away. Indeed, home insurance sometimes covers short-term rentals.

Ask your home insurance company if these rentals are covered, as every policy is different. You may need to add an insurance rider to ensure you have adequate coverage.

However, if you frequently rent out your primary residence, it is generally considered a business and is not covered by home insurance.

In this case, find out about roommate insurance.

Insurance for long-term rentals

If you are renting out your property for long periods of time, such as several months or even years, you will likely need rental insurance to protect you from potential financial loss.

How much does rental home insurance cost?

The Insurance Information Institute states that rental property insurance is about 25% more expensive than a standard home insurance policy.

A recent analysis by Forbes Advisor found that the average cost of home insurance is $1,854 per year for $300,000 of dwelling coverage and $100,000 of liability coverage. That would make rental property insurance about $2,318 per year.

As with any insurance product, the best way to find the cheapest rental insurance is to shop around. Compare the quotes of several insurers before making your decision.

Are you looking for home insurance?

Compare the rates of participating carriers in your area via Policygenius.com

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