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How Rental Property Insurance (Landlord Insurance) Can Benefit You

Many people in the United States own more than one home. Other than their primary residence, the additional homes are often rented out on a short- or long-term basis, either through traditional rental arrangements or through temporary means like Airbnb. Depending on the homeowners’ insurance policy, homeowners may discover that their policy does not cover losses when a house is being rented. Specialized rental insurance policies may be needed to protect these valuable investments. In this article, we’ll discuss some of the basics of rental property insurance.

What is Rental Property Insurance?

Rental property insurance, sometimes referred to as “landlord insurance”, is a policy designed to protect real estate investments that are being used as rental properties. These policies shield the property owner/policyholder from liability claims, such as when a tenant sues. They also cover losses or damage to the property itself. Finally, some rental property insurance policies even provide replacement rental income if the property becomes damaged due to a covered loss and is not rentable. A qualified insurance agent can help you determine what losses are covered by these specialized insurance policies and what other options may be available to help protect your investment.

It is important to understand that rental property insurance only covers the property itself, not the tenant’s possessions. In some cases, a landlord insurance policy will cover specific property items left for the exclusive use of the tenant, such as lawn equipment and home appliances. Tenants concerned about losses of their personal property should invest in renter’s insurance.

Two Insurance Scenarios

Rental property insurance may differ when it comes to short-term rental arrangements or long-term rentals. These policies may also differ depending on whether the property in question is the policy holder’s primary residence or if it is a second or third home.

Short-Term Rentals of a Primary Residence: In this scenario, a homeowner rents out all or part of his or her primary residence. Some insurance policies allow for short-term rentals with notice to the company. Other policies may require a specific policy “rider” or endorsement to the existing policy that provides coverage for the rental.

For homeowners who plan to rent all or part of their primary residences for short terms on a regular basis, such as through Airbnb or other weekly/monthly rental service, this may constitute a business activity, and most homeowners insurance policies will not cover business losses. An insurance agent can assist with the right type of business policy in these situations; typically, a “bed and breakfast” policy or a commercial hotel policy may be needed.

Long-Term Rentals of a Primary or Second Home
: Rental property insurance policies or “landlord” policies are typically required if a person should rent a property he or she owns for more than six months of a given year. This scenario can apply to those with a primary residence that they rent out, such as military personnel who may be stationed in another city but still own one home elsewhere, or it can apply to those with second or third homes purchased for the purposes of rental income.

What Does Landlord Insurance Cover?

A landlord insurance policy is designed to protect the structure of the home. Physical damage to the structure occurring from covered perils such as natural disasters like lightning, fire, or wind are typically covered. As mentioned earlier, specific contents of the home left by the homeowner for use by the tenants, such as appliances or lawnmowers, may also be covered under the policy. Check with a qualified insurance agent to find the right rental property insurance policy for your needs.

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