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Does Homeowners Insurance Cover Renters?

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If you’re a homeowner and want to start renting your property, you must insure the property and the tenants. Homeowners insurance protects you on multiple levels: It includes dwelling coverage for structural damage and property coverage for all your belongings. This coverage is mandatory when you let strangers into your home, especially when you do it on a full-time basis. If you have a second home you want to rent out on Airbnb or as a long-term rental, this guide will show you the kind of insurance you need and how to protect your investment and your tenants. The biggest difference is between homeowners insurance and landlord insurance (both of which offer similar coverage).

Does homeowners insurance cover renters? No, homeowners insurance does not cover renters – it only covers the structure of the building and the landlord’s personal property. It does not cover the personal property of the tenant or any other short-term inhabitant. This is why landlords must advise their tenants to purchase renters insurance (HO-4 insurance). You can also require tenants to purchase renters insurance before you allow them to sign a lease, as it’s only $20/month on average. If you’re a landlord, you have the option to purchase landlord insurance rather than homeowners insurance for your properties.

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Why You Need Landlord Insurance

Landlord insurance provides similar coverage to homeowners insurance, but the main difference is that it’s designed to protect properties that you don’t actually reside in. Most landlords rent out their second homes or other investment properties and don’t require the same level of coverage as they have on their homeowners insurance policy. 

Landlord insurance provides the same benefits: dwelling coverage, personal property coverage, and liability insurance. The named perils are also identical and protect your rental property from fires, hurricanes, lightning, and other natural disasters. Many homeowners insurance policies will require you to live in the home on a full-time basis, while landlord insurance doesn’t. Here are the main differences:

Personal Property

Personal property coverage is vastly different on landlord and homeowners policies. Homeowners policies cover all personal property in the home such as clothes, furniture, electronics, appliances, and others. Meanwhile, landlord insurance only covers the landlord’s personal property and not the tenant’s or the guests. 

In some cases, even the landlord’s personal property is not covered, which is why you should check to make sure in case you rent out a furnished apartment. This is not a major point of concern if you don’t leave your own personal property inside the property. Your tenants must purchase their own renters insurance to cover their personal belongings while they inhabit your property.

Dwelling Coverage

The dwelling coverage for the property is identical on both landlord and homeowners policies. This covers you for all possible damages to the property’s structure including the foundation, walls, roof, patio/deck, windows, doors, and other parts. You’re even covered for other buildings on the land such as sheds and garages, up to a certain policy limit. The policies provide the same coverage on this front.

Liability Insurance

Liability insurance is available on landlord insurance, but it’s different from liability insurance on homeowners properties. Liability insurance on landlord insurance can be used to fund the tenant’s medical expenses if they injure themselves on your property. They can also be used if the tenant presses charges against you. Example: You want to evict a tenant but they refuse and they sue you. You can use the liability insurance on your landlord policy to pay the legal fees.

How Landlord Insurance Is Utilized: Rental Types

Long Term Rentals With Contracts

Most properties in the United States are rented on a long-term basis. If you want to sign a contract with a tenant for six months or a year, you’re going to need a landlord or an alternative rental dwelling policy. Landlord insurance is optimal for long-term leases because it offers greater protection against lawsuits that might come up when you’re renting out an apartment for the long term.

  • Landlord insurance will protect your long-term rental property from all physical damage to the dwelling caused unexpectedly. It’s your responsibility as a landlord to fix all damage to the home because the tenant won’t be able to do this. This is why you need landlord insurance to pay for all repairs. 

Example: If the HVAC system leaks or the home is flooded, the tenant won’t be able to pay for this through their rental insurance. You must step in and use your landlord’s insurance to fix the home. You can also use your liability insurance to compensate them if they’re injured due to structural damage that you failed to fix on time. You can purchase landlord insurance for the duration of your lease with a particular tenant.

Airbnb & Short-Term Rentals

AirBnbs and short-stays can be much more profitable than long-term rentals, especially if you own a property in a touristy area. If you want to rent out your property for the short term such as 2 nights or a week at a time, you have many insurance options. Landlord insurance is not mandatory in this case as it is on long-term rentals because most homeowners insurance policies will allow you to rent out your property on a short-term basis, assuming you live in it and notify them on time. There are few insurance companies that will allow you to insure tenants on your homeowners insurance with an endorsement.

Adding tenants on a homeowners policy takes time and this is not something you’ll be able to do consistently if you have many rental properties. We recommend landlord insurance or commercial business insurance for those with more than one rental unit. If you’re renting the property to multiple guests each week, you’re a business owner and not just a landlord. Therefore, you either need landlord insurance or commercial business insurance. There are special hotel and bed and breakfast policies that are available for people who rent out small apartments or rooms on a short-term basis.

How To Protect Your Rental Property

There are multiple ways to protect your rental property with insurance coverage. The following are policy ideas you can discuss with your insurance agent:

Get Extra Liability Coverage

Remember that you never have enough coverage on your insurance policy as a landlord because you never know who may press charges against you and how much they could win in court. A standard homeowners policy will offer less liability coverage than a landlord policy. You can easily raise the liability limits on your landlord insurance.

Remove Your Personal Belongings

Make sure to remove your personal belongings from a rental property or a second home that you occasionally rent out. This is because landlord insurance does not offer the same personal property coverage as homeowners insurance. Only place belongings that you can afford to lose in places you rent out.

Check The Property Classification

Based on the insurance company, they might classify your property as a rental or as a regular dwelling. This depends on their policy terms. Most people are surprised to find out some companies define rentals based on whether there are family members inhabiting the space, or whether the space has a separate entrance for guests. Make sure your property is aligned with the definitions set by your insurer to guarantee you’ll be protected in case you need coverage.

Get Flood Insurance

Remember that flood insurance is not included in almost any homeowners or landlord insurance policies by default. This became commonplace since 2005 when Hurricane Katrina hit and changed flood regulations. Most insurance companies offer flood coverage as an endorsement, and you can purchase flood coverage directly from FEMA. This is paramount if your property is located along the Atlantic Coast.

Make Renters Insurance Mandatory

Make it mandatory to have renters insurance before you sign a contract with a tenant. This is an absolute must if you don’t want the tenant filing claims on your policy. Renters insurance can be purchased for as little as $150/year and it covers their personal belongings on your property. If this is a mandatory policy you can rest assured the tenants won’t be coming to you if their items end up damaged or stolen.

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