Renting out your home or any property that you own, requires different coverage than general homeowners insurance. One may think the home is covered despite who is living in it, but most insurance contracts have stipulations regarding this issue. There are also coverages that vary between the two policies, and insurance companies also like to know what type of risk, or who, they are insuring.
Most homeowners insurance policies “exclude” using your home as a rental property. If you do rent out your home, even for a short period of time, you may not have coverage because you have violated the insurance contract. Homeowners insurance is meant to cover a specific “Insured” and their “Residence Premises”. For example, a normal homeowners insurance policy provides coverage for the owner of the home, their family, and can also include others who live with the owner as well. (There are some inclusions and exceptions which can be found under the definition of “Insured” and “Residence Premises” in your policy documentation.) This regular policy does not provide coverage for people who rent the house from the owner, or potentially even just rent a room. Basically, if you aren’t considered an insured, there is no coverage for you under the policy.
With a landlord insurance policy, there is coverage for the dwelling, your personal property, and liability, but also other coverages necessary when renting out a home. The most important coverage is Loss of Rents. This coverage provides rental income in the event that a covered claim has required the tenants to move out for a period of time. While the tenants are not occupying the home, it would not be expected for them to pay rent. Also, with having the correct policy in force, there’s no concern when it comes to a covered claim.
The person who rents out the home also needs their own renters insurance. This type of policy will cover their own personal property as well as provide coverage for liability. If you are renting out your home, it is imperative that you require your renters to get renters insurance. You can also have them list you as an additional interest, so that you receive notification if the policy cancels or lapses. There would also be coverage for the renters under their policy to live elsewhere (ie. hotel) while the house is being repaired due to a covered claim.
It is crucial that both the owner of the home and the renter of the home carry proper insurance coverage. As always, please check your insurance policy to make sure that what you plan to do is covered by the policy. If you are unsure, we are here to help and assist with your insurance needs. Please call us at 480-513-3131 if you have any questions about your coverage.