Review Your Policy Before Renting Out Your Home

If you have ever considered renting out your home, you need to review your home insurance policy prior to signing a lease with tenants. Some home insurance policies will provide coverage for your home while it’s rented, while others will not or may only provide limited coverage. Your exposure to loss changes when you become a landlord instead of an owner occupying his own home. At a minimum, you must disclose to your insurance company that you’ll be using your home as a rental property.

In addition, while many homeowners think of their home insurance policy from a property damage perspective first, a landlord might consider the liability coverage first. Unlike your personal residence, where only invited guests can potentially be injured and file claims against you, a rental property is always occupied by third parties. Your tenants are a constant source of potential liability claims if they are injured in your rental home. Additionally, you are unable to constantly control or monitor their behavior. Because of this, it is important to have the proper liability insurance in place.

Also, your tenants may not care for your property in the same way you would. Therefore, you should have a sufficient amount of property insurance to repair or replace the rental property should it be damaged or destroyed by a fire or other covered perils. Your coverage should include not just the replacement cost of the house, but any of the contents that are in the house and being used by the tenants. For example, you may rent the house fully furnished or, at a minimum, with the appliances included. These are items that you should include in your insurance.

If you rely on the rent your tenants pay each month to help cover your mortgage and other expenses, you’ll need to also insure the loss of rents in the event of a claim. Remember, even if the house burns down and your tenants leave to find other living arrangements, you’ll still have to pay your mortgage payment. However, in that situation, you’d no longer have the rent from the tenants to help cover that expense. A landlord’s insurance policy can assist with expenses through the lost rents coverage on the policy.

Another thing to keep in mind is that your landlord’s policy will not cover the personal property of your tenants. It is not your obligation to insure their property, as they must purchase their own renter’s policy. It’s a good idea to require any tenants to purchase such a policy, as it will potentially eliminate disagreements in the event of a loss.

All in all, check with your insurance company before renting out your home. If it’s a short-term rental, you may already have the necessary coverages on your home insurance policy. If it’s a longer-term, more permanent situation, you will likely need to purchase a landlord’s policy. Many home insurance companies also offer landlord policies, so you might be able to stay with the same insurer. However, do not rent out your home before reviewing your policy and disclosing the rental to your insurer, or else you may find yourself uncovered in the event of a claim.

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