Your homeowners policy is designed to protect your occupied primary residence and possessions as well as protect you against liability claims. It typically does not cover investment or rental properties. If you have a property that you rent out regularly, you will need investment property insurance.
Due to the unique risks associated with rental property, you need to avoid any unexpected expenses that you would be required to pay out-of-pocket. Let’s look at the differences between homeowners and landlord insurance to help you choose the coverage that is right for your situation.
Investment Property Insurance vs. Homeowners Insurance
Determining whether you need landlord insurance can be confusing. Generally, the length of time the property is rented will be the key. For example, renting the property regularly requires landlord insurance. However, some homeowners policies cover one-time, short-term rentals if you add a home-sharing endorsement to your policy. Here are a few things to consider.
> Long-Term Rentals – If you do not occupy the property and rent it to someone long-term, you need landlord insurance. However, if you have a renter staying in part of your residence while you occupy it, homeowners insurance will cover this type of situation.
> Investment Property and Vacation Home Rentals – If you rent these properties regularly, you need landlord insurance. For investment property that is vacant most of the year, you may consider vacant home coverage.
Are you an accidental landlord? You may be one if you rent your property as a weekend or short-term vacation home. In this situation, not having the right coverage can be expensive. Your homeowners policy may not cover damages, medical bills, or legal fees in the event of a loss while the property is rented.
What Does Investment Property Insurance Cover?
Investment property insurance not only covers damage to the premises and personal property. It also provides protection against liability claims and provides rental compensation. Rental compensation can help you recover lost income if the property becomes uninhabitable.
Investment property insurance, also known as landlord insurance, includes two types of coverage to protect property owners or landlords:
Property protection typically covers the physical property of the home you rent to tenants. This type of coverage generally includes the following:
- Dwelling – Helps pay to repair the rented home, apartment, or condo if damaged by covered losses such as fire, wind, hail, or lightning.
- Other Structures – Helps pay to repair damage to detached structures such as a garage or fence if damaged by a covered loss.
- Personal property – Covers property you use to service the rental property such as lawnmowers, snow blowers, etc. if damaged by a covered loss.
These types of coverage are subject to the limits and deductibles stated in your policy. Each coverage generally has a separate limit and deductible.
If someone is injured on your rental property, investment property insurance helps pay their medical bills. It also helps pay your legal expenses if you are found responsible for the accident.
You typically don’t have to pay a deductible for liability claims.
Other Investment Property Insurance Coverages to Consider
Investment property insurance provides additional coverages you may want to consider, depending on the location or condition of your rental. Here are some coverages that may be beneficial to you as a landlord:
- Vandalism – Vandalism is not generally covered by a standard landlord policy unless you specifically add an endorsement. It covers vandalism to the main dwelling, contents, and other structures. However, if the property has been vacant for 90 days or longer, the coverage is not available.
- Burglary – A burglary endorsement covers damage caused by someone illegally entering the building and damage to personal property as well. The coverage will pay to repair a door or window damaged during the burglary. Like the vandalism coverage, burglary coverage is invalid if the property has been vacant for 90 days or more.
- Rental Property Under Construction – If you are renovating your existing rental, or building a new one, you can purchase additional coverage to protect the structure during construction.
- Building Codes – This add-on coverage will help reimburse you for additional costs of repairs if county codes require you to upgrade wiring or ventilation.
Unfortunately, like other types of insurance, investment property insurance doesn’t cover everything.
What Is Not Covered by Investment Property Insurance?
Although landlord insurance is great for helping pay for expenses caused by sudden or accidental losses, some things are excluded. Here a some examples:
- Maintenance or Equipment Breakdowns – You’ll likely have to pay out-of-pocket for things like a furnace or appliance breakdown.
- Tenant’s Personal Possessions – Things like a tenant’s electronics, clothes, and other personal belongings are not typically covered by investment property insurance. The tenant can purchase renters insurance to cover those items.
- Property You Share – This refers to renting out a room or floor in the home you occupy. You won’t qualify for a landlord policy in this type of arrangement. However, you may be able to add coverage to your homeowners policy for the area you’re renting. Your agent or insurer can help you with this information.
You should also know that most lenders require landlord insurance if the property you rent out is financed. However, even if the lender doesn’t require it, it is still a wise decision to have this type of coverage.
Sandier Insurance Will Help You Get the Right Investment Property Insurance for Your Needs
Investment property or landlord insurance provides peace of mind when it comes to protecting your assets. But, it can be difficult to understand whether you are eligible for this type of coverage. If you have questions about whether it is right for your needs, contact Sandifer Insurance Agency.
Sandifer Insurance Agency has over 40 years of experience helping property owners like you get the right coverage for their needs. We are a family-owned company located near historic downtown Cheraw, SC, and proudly serve customers in the surrounding areas as well.
We can help you get affordable, reliable insurance whether you need homeowners, life, auto, farm, or business insurance. You can reach us by phone, email, or online for a free quote.
iii.org/ – Coverage for Renting Out Your Home
forbes.com/ – What is Landlord Insurance? What Does It Cover?