The only common thing about a Homeowners Insurance Policy and a Rental Dwelling Policy – also known as a Dwelling Fire Policy, is that both of them cover real property, but the coverage specifics greatly differ from one another. Therefore, regardless if you’d like to rent out your own property or maybe buy an investment property, it’s safe to say that by having only a homeowner’s insurance policy you’re going to suffer from limited coverage.
If you plan on renting your property, a homeowners insurance policy may be adequate to have only if the rental is going to be a short-term rental, if you’re going to live within the residence or if the rental is on an isolated basis. For instance, you can consider adding a rider to your homeowner’s insurance if you just want to rent a room in your property. Also, if you’re the type who just rents their property for a few weeks during the summer vacation, then you don’t need to worry about getting new coverage.
However, in most other circumstances, your property becomes a business endeavor as soon as you rent it out, so that is why you need to get the right insurance policy for it. So in the event, you’d need to make a homeowners insurance claim, there’s a high chance that it’s going to be denied if you no longer live in your home. This is especially the case if you haven’t informed the insurer that you’ve allowed a tenant to move in and that you have moved out.
There may be cases when your insurer is going to honor a claim even if you have moved out of your home, but the terms in your policy won’t be able to address any issues with the tenant. The majority of homeowner insurance policies will only cover the damage to your possessions and property and in the event, someone is injured on your property, they also cover your personal liability.
But if a tenant is at fault, then they won’t cover liability in the event the tenant himself or his guests are injured while being in your property. To cover such damages, you need to get a landlord policy. In general, if you want liability coverage with your homeowner’s insurance policy, you’ll need to pay extra, but that’s not the case if you go with a landlord policy. There are 3 separate tiers that this type of coverage can be bought in, so it’s easy to tailor it to meet your specific concerns and needs.
Your Rental Income
Since landlord insurance policies are meant for business enterprises, they have many other pros over a standard homeowners’ insurance policy, especially when you decide to rent out your property. So if you go with the extra coverage, you’re going to be covered if something happens to the property and it cannot be inhabited anymore. This can be either through the actions of your tenant or natural disasters. In this case, the insurer will reimburse you a large amount of rent, usually for up to 12 months, if during the repairs your property cannot be rented out.
Your Tenant’s Property
Damage to the tenant’s property is covered by neither landlord nor homeowners insurance policies. If you do want to ensure that all your bases are covered, then you can be specific in your lease and stress out the fact that your tenant should buy his own renters insurance.
Of course, you should always check with your independent insurance agent to check the specific coverage that your policy includes or excludes.