If you are renting a piece of residential real estate, you are a landlord, even if the rental is temporary, or only during certain times of the year. When it comes to your insurance coverage, the big question is whether a standard homeowner’s policy is adequate for your needs, or if there may be a problem with coverage given your rental activities.
To sort this out, it is best to discuss your situation with a qualified insurance professional familiar with rental property issues. You may find that the standard homeowner’s policy that you have will not cover you when a property is rented to others on a permanent basis, or you may find that certain liability exposures are not addressed properly by your homeowner’s policy.
How Do You Know When Landlord Insurance Is Necessary?
In most cases your homeowners policy will provide adequate coverage if you are renting your property out on a temporary basis, meaning just a few weeks out of the year. If you are renting your property more often than that, you may find a coverage problem if you have a loss.
If you own a multi-family dwelling and you live in one unit and rent the others, a homeowner’s policy adequate as long as the proper endorsements are in place. These endorsements are designed to take into consideration the additional exposures you may have while a portion of your property is rented to tenants. However, if you own a property of one or more units that is rented completely to others and you do not live in the building, a homeowner’s policy will not suffice. This situation will require a dedicated rental property policy or landlord policy.
Are All Landlord Policies The Same?
There are as many variations in landlord policies as there are with any homeowner’s policy so it is important to know what you are getting in your policy in terms of coverage features and policy limits.
A landlord policy can be written with a form that covers a simple list of perils, or it can be written to include all perils, except certain causes of loss that are excluded. This second type of policy offers a much broader coverage than any “named peril” form.
Your limits will be determined by the value of your policy, and you can purchase a landlord policy that affords coverage on a replacement cost basis, or on an actual cash value basis. Actual cash value means that the insurer will make a deduction for depreciation on any claims so be sure that you understand the type of coverage that is offered by your policy.