What Landlords Should Know about Rental Property Insurance
Buying a rental property can be an amazing investment opportunity, though it can come with its own set of challenges. Many times you’ll need to work on fixing up the building and finding tenants, and those won’t be your only hurdles. Rental property insurance can vary drastically from your typical homeowners insurance policy, and you will need to evaluate just how much coverage you’ll need.
Rental property insurance is similar, but not the same as homeowners insurance — your standard homeowner’s policy won’t cover your rental property, so you should talk to your broker before you consider renting out a space.
While there are a few differences between the two (according to Insurance Information Institute, rental property insurance can be more expensive), the main distinction is that a rental policy will cover damages to the property that are caused by tenants, as well as liability insurance in case a tenant brings suit for an injury.
You should discuss any change in occupancy with your broker beforehand, because doing so afterward may leave you with no coverage. You should also disclose all relevant information about your rental property to your insurance broker so that you can determine how much coverage you’ll need.
Relevant information for your broker will include things like whether or not you allow pets in the building (if so, what kind?), what kind of proactive measures you’ve taken to making the building more safe and secure. For instance, keeping a fire extinguisher in each unit can lower the insurance premium both for you and for your tenants. Your broker can discuss with you other steps you can take to increase the security in your building.
Protecting Your Rental Property
Discuss your rental property coverage with your tenants so that they understand what is and isn’t included in the policy, and discuss with them things like maintenance, snow removal, and common areas, so that everyone knows what they’re responsible for.
Ask your tenants to obtain a renters insurance policy before they move in — policies are fairly affordable and can typically be added to other policies, like car insurance, as a rider. Ask your tenant to list you as the landlord on their policy. Claims where both parties have insurance in place usually go much better than when one or both are uninsured.
Let your tenants know that renters insurance will also help protect them. Renters insurance policies will cover their personal property and protect their personal liability should a claim be made against them. Renters insurance is a win for everyone.
Insurance for Airbnb
Airbnb has taken the rental industry by storm, empowering tenants to sublet their units and allowing landlords to maximize profits with short-term bookings in between tenants. Tenants and landlords alike may believe that they’re completely covered under Airbnb’s Host Protection Policy, but this is not the case.
The home-sharing site’s policy covers the host (and landlord, as an additional insured) in the event that a guest damages the property or brings a lawsuit for an injury obtained on the property. That’s basically where the coverage ends, so if a guest steals personal belongings or brings bed bugs into the unit, tenants and landlords alike are not covered.
The good news is that many rental insurance policies offer more comprehensive coverage for home-sharing scenarios, so make sure you insure before renting out Airbnb. Keep in mind that your insurance provider may consider your home sharing “commercial activity” if you host guests too frequently, which would violate your policy. Check with your provider to see what they allow.
If you’re a landlord, discuss home-sharing services with your tenant to make sure you’re on the same page. If you’d rather they not list the unit on Airbnb and other sites, make sure there’s a clause in the lease that acknowledges this. If you allow home sharing, make sure you’re listed as an additional insured, and discuss your policy with your insurance agent so that you’re fully covered.
Ultimately, the best way to make sure your rental property is adequately covered is to talk to an independent insurance agent. They can make sure you’re buying the right amount of coverage at a fair price.
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