What Home Insurance Do I Need To Rent Out a Home?
Renting out your home is much different than living in it. That should go without saying, but it extends to the type of insurance you need for it as well. If you’re just occasionally renting out your own home, you might be covered by typical homeowner’s insurance. But if you’re going to rent out on a more permanent basis or rent out a home you don’t live in, you’re going to need landlord insurance, a different type of home insurance, to cover it.
Keep in mind that everything here is just a guideline. For specifics, you’ll need to check with your insurance provider and any relevant laws.
Why get landlord insurance?
You want landlord insurance for the reason that you want any other type of insurance: you never know when something is going to go wrong. Just because you’re renting out your home doesn’t mean bad things can’t happen there. In fact, it’s even more likely to happen. Renters tend to be more reckless and treat the property worse than owners, making issues even more likely to occur.
It’s also not that expensive, either. It’s going to cost more than a typical homeowner’s policy, usually by around 20%. Given how much it would cost if you had to pay for a catastrophe out of your own pocket and that it’s more likely for renters to have issues with the property than owners, it’s an understandable difference and an easily justified expense. Just keep in mind that you need to budget for it alongside your other rental-related expenses.
What does it cover?
Here's an outline of what a typical landlord insurance policy covers.
- Damage done to the building itself
- Other structures on the property, such as a garage
- Items kept on-site used to service the property
- Medical expenses of someone who is injured on the property
Some policies can cover more than just that, such as lost income if the property is too damaged to be rented out for a time. Make sure to read any policy carefully to know specifically what it will cover.
What else should you do?
While your insurance covers the building, it doesn't cover everything your tenant puts into it. You should encourage them to get renter’s insurance to pay for any loss or damages they suffer. If you’re particularly concerned about lawsuits or helping tenants find housing in case of disaster, you could require them to have a renter’s insurance policy in the lease. This provides an extra layer of protection for both you and your tenants, making it easier to get through difficult times. There are different laws about requiring renter’s insurance by state, so make sure to check before writing that into the lease.
To get started, the best place to go is to talk to your current home insurance provider about landlord insurance to see what they offer, or with a lawyer to cover relevant laws in your jurisdiction.