If you own more than one residential property, chances are good that you rent out the other(s). If you have homeowners insurance on your home, do you have insurance on the other properties?
Rental property insurance, also known as dwelling insurance, is different from homeowners insurance. Rental properties create different sorts of risks that are not inherent to your owned home, most of which would not be covered under your current homeowners insurance policy.
Here are a few reasons why you should have rental property insurance.
Your Rental Structure Isn’t Covered
Your homeowners policy covers the main house and any other structures on the same property or at the same address. Even in cases where the rental property is on the same premises (such as a garage apartment) the usage of the structure would exclude it from homeowners insurance coverage.
A rental insurance policy may cover the structure in a couple of different ways: with a comprehensive policy (all perils except those that are excluded) and as a named perils policy, which only covers those perils specifically named. It can also include other structures such as fencing, walls or a shed on the same premises, though it depends on the purpose of the other structure.
Other Property Coverage For Rentals
If the property you rent is furnished, or if you store your belongings on the rental premises, personal property coverage should be added to the policy. This coverage will repair or replace items that you own and have a financial interest in, but will not cover the property of others, such as tenants.
Another item to consider is Loss of Rents coverage. If the structure you rent is damaged and uninhabitable, your insurance policy will reimburse you for the loss of rental income while the structure is being repaired or replaced. Extra Expense coverage is also available for those extra expenses that may be incurred while securing and repairing or replacing the rental property.
Limits for these lines of coverage are selected by the policyholder, and are not unlimited. Talk to your insurance broker if you have personal property on your rental premises or if you would like to add Loss of Rents and/or Extra Expense to your policy.
A rental property is considered a business, so the personal liability insurance on your homeowners insurance policy won’t cover you for any liability arising out of your rental properties. If your tenant or a guest is injured on your rental property, your homeowners liability coverage will not respond. Rental dwelling liability insurance coverage will respond.
An added benefit of having liability insurance included with your rental dwelling insurance is that it covers you in cases such as libel, slander, even discrimination. The legal fees from these types of lawsuits can quickly drain your bank account if you aren’t insured against them.
What Isn’t Covered
As with nearly every insurance policy, flood and earth movement (earthquake) are excluded. These lines of coverage need to be insured separately. Your broker should provide quotes for these hazards with your dwelling insurance policy quote.
There are many ways to customize a rental dwelling insurance policy to fit your needs. An annual insurance checkup with your broker is a good way to be certain that you have the proper coverage to protect your investment.