What is rental property insurance? – Forbes Advisor

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If you own one or more properties that you rent out, you will most likely need rental property insurance.

Here’s what rental property insurance is, what it covers, and whether you might need it.

What is rental property insurance?

Rental property insurance, also known as landlord insurance, covers the risks associated with renting your property (home, apartment, condo, etc.) to others. It can provide financial protection in the event that your property is damaged or someone is injured on your property.

Depending on the policy you purchase, rental property insurance can also protect your rental income if the property becomes uninhabitable due to a problem listed on your policy.

If you plan to rent your property, it’s important to check what coverage is available on your existing homeowners insurance, if any.

What does rental property insurance cover?

Rental property insurance often includes the following coverage.

Housing coverage

This covers physical damage to the building caused by issues specified in your policy, such as wind, fire and hail.

Liability coverage

Liability insurance protects you financially if you are found legally responsible for someone’s medical bills or property damage related to the rental property. It will also cover your legal defense if you are sued, to the extent of your liability.

Personal property

If you have things like appliances or lawnmowers that tenants can use in the property, they may be covered by your rental property insurance policy. Some insurance companies offer this as additional coverage.

Loss of rental income

If you are unable to rent your property for a period of time due to damage caused by an issue covered by your policy, such as a fire, lost rental income may be covered. It is also offered as an additional cover by some insurance companies.

What does rental property insurance not cover?

Some expenses are not covered by rental property insurance.

Personal property of the tenant

If your tenant’s personal property is damaged, it is not covered by rental property insurance. Renters need their own renters insurance to cover their personal belongings.

Maintenance or equipment failure

Things break sometimes. But if the hot water heater in one of your rentals dies, you’ll likely have to pay out of pocket for repairs or replacements.

Shared property

Sharing a home, such as renting out an extra bedroom or floor in your home, is generally not covered by a rental property insurance policy. Rental property insurance is for real estate that is not owner-occupied.

Flood or earthquake damage

These disasters require their own, separate insurance policies.

If you live in an area prone to such natural disasters and rent out your primary residence, you may already have a separate earthquake or flood insurance policy for your home.

Additional rental property insurance

Some situations are not normally covered by rental property insurance, but you can add them to your landlord insurance policy, such as:

Vandalism

If your property is intentionally damaged or vandalized, the damage is usually not covered by a standard property insurance policy. Some insurance companies offer vandalism coverage as an optional extra to purchase.

Burglary

Renters insurance may cover damage to your property in the event of a break-in, but usually does not cover stolen items. You can add coverage for items used to maintain the property, such as lawnmowers or appliances, at an additional cost.

Unfinished construction

If your property is under construction, you can purchase a special coating for the structure until it is ready for tenants.

Building regulations

If you need to renovate your property, you may need to make certain updates to meet new building codes. Sometimes you can purchase insurance coverage to reimburse yourself in these situations.

Trauma

This coverage can help if you are sued for wrongful eviction.

Do I need rental property insurance?

Short-term rental insurance

If you only occasionally rent out your primary residence, you may not need rental property insurance.

For example, maybe you go on vacation a few weekends a year and rent your primary residence for that time. In this case, your homeowner’s insurance policy may cover you in the event that your home is damaged while you are away. That’s because homeowners insurance sometimes covers short-term rentals.

Check with your homeowner’s insurance company to see if rent is covered, as each policy is different. You may need to add an insured to ensure adequate coverage.

However, if you frequently rent out your primary residence, this is generally considered a business and not covered by homeowners insurance.

In this case, look into shared accommodation insurance.

Insurance for long-term rental

If you rent a property for a long period of time, such as several months or even years, you will likely need rental property insurance to protect yourself against potential financial losses.

How much does rental property insurance cost?

The Insurance Information Institute says that rental property insurance is about 25% more expensive than a standard homeowners insurance policy.

A recent analysis by Forbes Advisor found that the average cost of homeowners insurance is $1,854 per year for $300,000 in home coverage and $100,000 in liability coverage. That would put rental property insurance at about $2,318 a year.

As with any insurance product, the best way to find the cheapest rental property insurance is to shop around. Before making a decision, compare the offers of several insurance companies.

Looking for homeowners insurance?

Compare rates from participating carriers in your area at Policygenius.com

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