Today, we’re talking about insurance for rental properties. Many people believe that when they decide to rent a home, all they need is a homeowner’s policy and that will cover all their needs. However, they may find out differently after experiencing a loss.
A homeowner’s policy will typically only cover an owner-occupied home. So when you decide to rent out your home, you should convert that homeowner’s policy to a landlord policy. This is often referred to as a dwelling policy, and there are three different types of dwelling policies.
This is called a basic dwelling policy. It will cover the structure of the house and it’s probably the most economical way to cover your rental home.
This is a dwelling policy that is a broad policy. You can name perils to go with the structural coverage of the house.
The DP-3 policy is a special policy that covers the structure, all perils unless there are specific perils listed that are not covered.
Always read your policy and make sure it includes everything you expect. Typically, these policies cover liability and loss of rent. If the house becomes uninhabitable, the landlord can collect the rent from insurance. They will also make medical payments and cover appliances owned by the landlord. Always seek the advice of an insurance professional so you can be sure you have the right coverage for one of the largest investments you have.
Another question we get a lot is about renter’s insurance. You can require tenants to carry renter’s insurance, but you must state that requirement in your lease agreement. Many tenants assume the landlord’s insurance will cover their personal property, but it does not. In the Texas Association of Realtors residential lease section, it states that the landlord’s insurance does not cover the tenant from loss of personal property. It recommends the tenants get their own insurance. If you aren’t requiring renter’s insurance, make sure they are aware of that section so they aren’t expecting you to cover their property. The average renter owns $20,000 to $30,000 of property. The average cost of renter’s insurance is less than $200 per year. Explain that to your tenants so they understand the value of that insurance. It’s a small premium to cover their belongings.
Typically, a renter’s policy will also cover loss of use as well. If the house is uninhabitable, the tenant will get additional living expense money. It also covers personal liability. If someone is hurt on the property and it’s the tenant’s fault, the tenant will have coverage.
The landlord benefits from renter’s insurance, particularly with the liability coverage. If the tenants don’t have any liability coverage, someone who gets hurt there will turn to the landlord if there is any legal action considered.
If you have any questions about insurance, please contact us at DeGuire Paperless Property Management.