Rental Property Insurance
Property-Owner Insurance
Chances are that your policy only covers owner-occupied homes. If you start renting out to someone else, the coverage no longer applies. And as renters are generally not held liable when a large appliance malfunctions, a person suffers an injury on the property (through no fault of the tenant), a forest fire damages or destroys your home, or burglars simply empty the place, that means you could be left out to dry for these or other misfortunes caused by humans or Mother Nature.
This is where landlord insurance comes in. As you begin price shopping, consider what you need to specifically address and protect against in your rental property.
What Does Landlord Insurance Cover? A good, comprehensive landlord insurance policy will have three core protections:
• Property Damage—This is coverage in the event that the real estate or furnishings suffer from a natural disaster, fire, electric/gas malfunction, earthquake, vandalism, or irresponsible tenants. If possible, try to get a policy that offers replacement cost instead of the actual cash value (especially if fixtures and furnishings are old) or a predetermined lump sum of cash.
• Lost Rental Income/Rental Default Insurance —Should something cause your property to be totally uninhabitable (severe mold, termites, a rat infestation, or a sinkhole), this feature provides temporary rental reimbursement to cover the rent money you’d otherwise receive if tenants could be occupying the property.
• Business Liability Protection—This is coverage for the medical or legal costs that might ensue if the tenant or a visitor suffers injury due to a property maintenance issue (such as icy walkways, architectural collapse, or an out-of-control hive of bees).
You might also see underwriters refer to different packages as DP-1, DP-2, or DP-3 (DP stands for “dwelling property”). Each of these refers to varying levels of coverage, with DP-1 being the most basic, and DP-3 representing the most comprehensive.
