Rental property insurance

While owning a house provides security and peace-of-mind, a second home can bring additional income. The overall revenue from vacation rentals was $87.09 million, a 7% increase in 2019. While renting out your home to guests is a great way to make some extra cash, there are risks to consider.

Home insurance and renters insurance are two things you may be familiar with. Personal property coverage is another. If you’re thinking of renting your house out, you may be starting a business. Standard home insurance won’t suffice. You can rent out a room or allow guests to access the whole property. It is important to learn more about rental property insurance and to purchase it.

Do I need insurance to rent my house?

Insurance is required before you rent out your house. The length of your rental period will determine the type of insurance you need. You can talk to your home insurance agent about the type of coverage that you require, but here are some guidelines.

Short term rentals

A homeowners or renters policy may be sufficient coverage for short-term rentals. As long as your insurance company is informed that you are renting your house, it might suffice. To extend your coverage, some providers may require that you purchase an endorsement policy.

Your homeowners policy may provide enough coverage if you rent out one room in your house. It all depends on how long the renter stays and how many people live in your home.

Renting your home on a short-term basis would be considered a business. Renters and homeowners insurance does not cover business-related activities. In this instance, you will need to buy a business insurance policy. Ask your insurance provider to purchase a hotel or bed and breakfast policy.

Long-term rentals

Insurance requirements for long-term rentals are different. You will need landlord insurance if you rent your home to the same person for six months or one year. The landlord policy, also known as rental property insurance, offers more protection than homeowners insurance but generally costs about 25% more.

Remember that renter’s insurance does not cover their belongings. To protect their personal belongings while renting your house, they will need renters insurance.

What’s the difference between homeowner insurance and landlord insurance?

Many similarities exist between landlord insurance and homeowner’s insurance. Both insurance policies cover damage to your home’s structure. The loss of your home is covered if it is damaged by a major storm or fire.

Both homeowners and landlord insurance cover personal property and liability, but in different ways. Home insurance covers the homeowner’s personal property, both inside and out. Personal property coverage is usually limited to items that can be used by tenants. Renters’ clothing and luggage would not be covered.

There are also different coverage options for liability. Homeowners liability insurance protects the homeowner from legal fees in the event that someone is injured in their home, or accidentally damages another person’s property. Liability coverage for landlord insurance does not cover renters’ injuries while they are at the house.

Another difference is that rental property insurance can cover income loss if the home is not rented out due to a covered loss. If a hurricane damages your Florida vacation home that you rent via Airbnb, your landlord insurance might reimburse you for rental payments while you fix up the property.

Renters get additional coverage

Your rental type will determine the coverages your renters require. Short-term and vacation renters are unlikely to need additional insurance. Renters who have homeowners or renters insurance will likely be covered at least some of their personal property on vacation if they have adequate coverage.

If your guest will be staying in your rental property for a long time, you may consider renting renters insurance. The landlord’s insurance policy does not cover personal property. Your tenant may also need liability coverage in the event of guest injuries or property damage. Renters insurance is very affordable, at an average cost of $179 per calendar year according to the Insurance Information Institute (III).

Questions frequently asked

What if I have homeowners’ insurance but rent my property?

It all depends. Your homeowners insurance policy may provide sufficient coverage if you rent your house for short periods. You may have to increase your policy limits or buy an endorsement policy for additional coverage. You will need rental property insurance if you rent your house to the same person or group of people for a long time, such as six months or more. Ask your insurance company for a recommendation if you aren’t sure which type of insurance you should have.

What is the cost of landlord insurance?

The Insurance Information Institute (III) estimates that landlord insurance is about 25% more expensive than homeowners insurance. The average rate for landlord insurance varies from one state to the next, but you can expect to pay approximately 25% more than your home insurance premium. Although landlord insurance isn’t always affordable, it’s more expensive than homeowners insurance and offers greater protection.

Does the insurance I have through my rental company suffice?

Airbnb and other rental companies often offer insurance to people who rent their homes on the platform. Many people choose to rely solely on the insurance provided by Airbnb, as opposed to purchasing their own insurance. But, insurance policies from rental companies don’t always cover all situations. It is much easier to file a claim through an Airbnb company than through your own insurance company. Rental company policies don’t usually cover income loss, but landlord insurance does. It may be worth spending more money to purchase a complete rental property policy through your insurer.