What Kind of Insurance Do You Need to Rent Out Your Home

 By Catherine Powell

Image courtesy Pixabay

So, you're looking to get into the property rental game. There are many reasons why a homeowner may wish to rent out all or part of their home.  Be it to help pay the mortgage, to keep a property occupied while you relocate elsewhere temporarily, or to smooth the way for the eventual sale of your home, renting can be the way to go.  If you're considering renting your home, turning your garage into an apartment, or joining the Airbnb craze, there are some things you need to know before you hand a renter the keys.

Your existing homeowner's policy won't cut it when you become a landlord. - That's because having a tenant increases your risk as a homeowner.  It's also why homeowner's policies routinely list rental of a home as an exclusion. Renting out your property is considered a business activity which insurance companies exclude from homeowner's policies.  Why is that? Tenants can damage or destroy property.  They can injure themselves or others.  If a tenant gets injured while living on your property or accidentally burns your home to the ground, the insurance company doesn't want to be left holding the bag.  Therefore, if you plan on having a tenant under your roof, you need to talk to your agent to find out what you need to do to make sure your property is fully covered.  Depending on the circumstances, all it might take is a rider on your existing policy.  

Doesn't Airbnb provide protection to hosts that use their service? - If you're looking to start a side gig as an Airbnb host, here's what you need to know about getting involved in the short-term rental business.  While portals such as Airbnb do offer liability coverage and property protection, there are several gaps that hosts need to fill.  Depending on whether you seek to rent out a room or your entire home on a short-term basis, ask your agent whether an Airbnb endorsement on your existing homeowner's policy or a home-sharing policy will bridge the gaps in coverage while saving you money over a landlord policy.

What advantage does a home-sharing policy provide that a rider may not? - While a rider on your existing policy may prove sufficient to help you keep your homeowner's policy in effect while being able to cash in on short-term rentals, a home-sharing policy offers added benefits.  Also known as short-term rental insurance, this kind of policy beefs up your personal liability limits, plus it can cover your legal expenses should a claim be brought against you by a tenant.

How do landlord policies work? - If you intend on renting out your home on a long-term basis, you may be required to obtain a landlord policy.  These policies provide bumper to bumper coverage to include everything from property damage and theft protection, to legal claims resulting from any injuries sustained on your property.  On top of that, a landlord policy also reimburses you for lost rent should your property become uninhabitable due to structural damage.  

What do landlord policies exclude? - While landlord insurance is comprehensive, it is by no means exhaustive.  Exclusions can include such things as compensation for evictions, vandalism, building code changes, and construction damage.  The good news is that add-on coverage for these and other issues may be added as riders to a landlord policy.  If you have any questions about exclusions and optional coverage, you should talk to your agent.

What is dwelling insurance and what does it cover? - Let's say you decide to move out of town or out of state for a year to take advantage of an employment opportunity but you don't want to sell your home in case the job doesn't pan out.  This is where dwelling insurance is a godsend.  It allows you to rent out your home for a limited time (such as a summer vacation rental) if you don't plan on keeping the property rented on a continuing basis.  It will even cover your personal belongings, such as furnishings and appliances, should you decide to rent your home out fully furnished.  What isn't covered under such a policy are your tenant's possessions.  They would need to acquire renter's insurance to protect that.

How much do typical rental insurance policies cost? - Landlord insurance on a single dwelling costs about $100 per month on average.  Home sharing policies , dwelling insurance, and Airbnb riders cost even less.

Should you require long-term tenants to purchase renter's insurance prior to moving in? - Since it's perfectly legal for a landlord to require tenants to carry renter's insurance, there are several reasons to do so before you allow a renter to move in.  Not only does it cover the tenant's own possessions, it also helps protect a landlord from lawsuits brought by a tenant should they or someone they know get injured on the property.  

What  happens if you rely on your homeowner's policy to protect a rental property? - If you don't at least have a rider on your existing policy and you rent your home to tenants, you run the risk of having an insurance claim denied should your property be damaged or destroyed if you aren't residing there.

Catherine Powell is the owner of A Plus All Florida Insurance in Orange Park, Florida. To find out more about saving money on all your insurance needs, check out her website at http://aplusallfloridainsuranceinc.com