Home Insurance When Renting to Tenants
If you are renting out part or all of your home, you are not alone. Half of all rental properties in the US are owned by individual investors, about 22.7 million units. These units are typically single family homes or duplexes. Many homeowners think their homeowners insurance policy protects them, but in reality there are special types of coverage needed for landlords.
The type of coverage that you need when you rent to tenants is often referred to as landlord insurance. Landlord insurance is a series of additions, riders, or even alternative policy forms that give you additional protections from damage and liability arising from tenants. Also, be sure to require your tenants to carry renters insurance so that their personal liability is covered.
There are no legal requirements for insuring a property that you are renting out. We still recommend that all landlords have the appropriate landlord or rental policy, including liability coverage, in order to be fully protected.
What Your Policy Should Cover
- Coverage for property damages from storms and other natural disasters (like traditional homeowners insurance)
- Liability coverage
- Loss of rental income (not relevant for when your tenants don’t pay rent, but used when your property becomes unlivable due to a covered loss)
Common Landlord Claims
Landlords have quite a bit of liability exposure to their tenants. Liability coverage is often a part of your landlord policy, but you may want to purchase an additional umbrella policy to cover your costs.
Some of the most common liability claims that landlords face:
- Responsibility for injuries that occur on the property
- Responsibility for dangerous conditions, even if you are unaware of the issue
- Shared responsibility for injuries or damages caused by pets
- Responsibility for security issues
- Responsibility to others for conduct of tenants
The most common and costly claims against landlords are personal injury cases, where injury was caused by the landlord’s negligence. A 2017 Supreme Court opinion about landlord liability in personal injury declared that landlords are not generally responsible for injuries occurring on the rental property, except in cases where the injury was caused by dangerous conditions that the landlord failed to remedy.
Cost of Landlord Insurance
You will pay more for landlord insurance than you would for homeowners insurance on a home you occupy. This is because a tenant carries additional risk and, generally speaking, you treat a property better if you own it outright. You can expect to pay about 20% to 30% more for landlord insurance.
If you are only renting a portion of your home on a temporary basis, such as with companies like AirBnB, you will still need to have additional coverage beyond your homeowners policy. AirBnB and Home Away both offer a $1 million liability policy as part of their service to homeowners. If you temporarily rent a room without using one of these platforms, you will need to talk to your agent about getting the appropriate coverage.
If you are thinking about renting our part or all of your home, hopefully this information will help you find the right coverage.
At your service,