While planning to turn your property into a rental asset, you must first ask, do I need homeowners insurance for a rental property? or Should I go for landlord insurance? If you are thinking about which insurance you should buy to protect your property while the renters stay there, here is a short guide to help you make the right choice.
Basically, if you are going to put the property on rent all the time, you would probably need to have a landlord policy. Still, if you are going to rent it out occasionally only, homeowners insurance would be a better choice. As far as property protection is concerned, the quality of insurance coverage provided by your policy makes a significant difference.
The Choice Depends on the Length of the Rental Agreement
If you are planning to temporarily rent out your property for a particular occasion only, such as to accommodate people attending a sports event in your city, then a homeowner insurance policy would provide a certain degree of protection needed during that time. This may provide coverage against any risks involved, such as a break-in or a fire accident.
On the other hand, property owners looking forward to renting out their single-family home, second home, or investment property for a continual basis must consider protecting themselves with landlord insurance.
Understanding the Difference Between the Two
Like homeowners insurance, a landlord insurance policy also covers the building’s structure itself, including the sheds and fences. If any of these get damaged due to wind, fire, hail, or lighting, both the policies will give you coverage. However, homeowners insurance is applicable only if the owners themselves are living inside the property premise. This may happen when you decide to give one room or a limited area for rent and live in the remaining parts.
Coverage offered may differ from one policy to the other, and you must get in touch with your agent to know the exact details. However, property owners looking forward to renting out their entire property will need landlord insurance.
Coverage for Personal Property
Homeowners insurance covers different kinds of belonging you have kept in your property while rented out, including the furniture, computers, clothing, etc. On the other hand, landlord insurance covers items used for servicing of the rental property.
If you have left behind some personal items in the property while renting it out, and their aim is not to service the property, homeowners insurance will provide protection to them. On the contrary, items like a lawnmower, snowblowers, and other such items can be covered by the landlord’s insurance.
Coverage for Liability
Landlord insurance offers liability coverage for only the rented property. If your tenant gets hurt inside your premises and they file a claim against you, then your landlord insurance offering liability coverage will pay for your legal fees and their medical expenses.
But, when you have homeowners insurance, the policy covers you and your family living inside the property, even if the injury takes place out of the home.
How Insurance Provides Protection to the Tenants
Both homeowners insurance and landlord insurance policies do not provide coverage for the personal belongings of your tenants. That is why you would want to add renters insurance as a condition in your lease agreement. Renters’ insurance policy will provide liability protection and also cover their possessions.
So, before welcoming any renters in your property for any period, take advice from your insurance agent and find out the type of coverage it can provide for your benefit. If you still have questions like, do I need homeowners insurance for a rental property or landlord insurance, a professional insurance agent will be able to give you the right guidance.