Does My Homeowner’s Insurance Policy Cover a Rental Property?
Written by: Twin City Group
There are a variety of reasons why individuals who own homes chose to rent out their property. Money may be a concern. A job could send them around the world. Maybe a child moved away, and you have more space than you could ever use. Or spending the summer at the lake sounds preferable to city life.
No matter why you decide to rent out your second property, it’s important to note that your rental property may not be covered entirely by a homeowner’s policy while rented, and otherwise, not owner occupied. Often, you’ll need a specialized insurance coverage when you rent your property. These policies are typically referred to as Dwelling Fire policies, or DP-3 policies. This specialized policy, depending on the insurance carrier, will allow you to keep your main home on the policy, but add the second property as an additional location.
Other insurance carriers, have the ability to allow you to write a standalone Dwelling Fire/DP-3 policy, while keeping your main property that you live in, on a standard home policy by itself.
What is Homeowner’s Insurance?
Homeowner’s insurance is a comprehensive, package policy designed to protect people who purchase homes from damages to their house and any legal liabilities that occur on the property. Many natural disasters are covered by these policies, but not all of them. As well, most homeowner’s policies do not cover renting the house or a room out. These policies also do not cover earthquakes and floods.
Rental Properties and Homeowner’s Insurance
Before using your house as a rental property, it’s imperative to contact your insurance agent and find out if homeowners covers you.
Here’s a quick breakdown of some common scenarios:
If you’re heading out for a week or a couple of weekends and renting out your place, you’ll find a few scenarios likely. Some insurance companies allow homeowners to rent their places out on a short-term basis if they have informed their agent of the arrangements.
A few insurers will require a rider or endorsement to the existing homeowner’s policy to extend coverage. If you’re regularly renting your home out on a short-term basis (Airbnb-style), then you’ll need a business or bed and breakfast policy. Using your home to make money through constant rentals is always considered a business.
Long-Term Rentals and Second Homes
If you’re renting a home or second property out to an individual or family on a long-term basis, you’ll need a rental Dwelling Fire policy/DP-3 or some form of landlord coverage. Often, a long-term rental will require six-months to a year lease, but even three months rentals can qualify for this coverage. Most homeowners find a landlord policy runs about 25% more than a standard home policy. This is due to the inherent risk of renters not taking great care of a property.
Landlord insurance covers physical damages, legal liabilities, and more. These policies are very similar in nature to standard home coverage. Dwelling Fire/DP-3 policies also cover loss of rental income if the property could not be rented out due to damages.
Landlord insurance only covers the financial interests of the owner. The renter’s personal property is not covered at all. As such, many landlords require all tenants to purchase and provide proof of renters insurance before a lease can be signed.
Dive Into the Details With Twin City Group
If renting your home seems a little more intimidating now, don’t get too stressed out. Contact the insurance professionals at Twin City Group. Our experience will help you navigate your new role as a landlord and help you find the perfect coverage for your house.