Your insurance needs for your home depend on how you use it. If you occupy it, you will need homeowner’s insurance. If you rent it out, you will need landlord’s insurance.
If you plan on becoming a landlord, then you should educate yourself on insurance. This research will help you inform your tenants about what insurance they need.
Unfortunately, this topic is a little more complicated than it may first appear. In this article, we will look at the different aspects of home insurance.
Are you a new landlord? You are a new landlord if you bought a home for your own use but have now decided to rent it out. By contrast, an investor is someone who only buys a property to rent it out.
You may be a new landlord if you have just bought a new home but find it difficult to sell the old one. As a result, you have decided to rent it out.
You may also be a new landlord if you have bought a vacation home but would like tenants to pay it off. In this case, you are looking at shorter term rentals.
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If you are a new landlord, then you need to look at your homeowner’s insurance. It may not give you the coverage you need. It may only cover owner occupation.
After reviewing your policy, you may conclude that you need landlord’s insurance. The best way to decide whether it applies is to talk to your insurer. If you blindly stick to your homeowner’s insurance, you are taking a risk. Your insurance company may not cover your claims. This is because your insurer believed that you would be living in it, not renting it out.
You will not need landlord’s insurance if only renting your home for a few weeks of the year. Perhaps, you might be living in a city where there will be an influx of visitors for an event. During the Olympics, for instance, many people rent out their homes. There is a huge shortage for accommodation. With visitors flooding in from all over the world, it’s profitable to rent.
Still, even if you are only renting for a few weeks, you still need to contact your insurer to make sure you will still get coverage if an accident should happen.
So, for occasional rentals, your home insurance will cover your insurance needs. But, if you are renting for a few months or years, you should get landlord’s insurance. Usually, anything past four weeks would requires this type of insurance.
Another factor that determines if you can use your home insurance is where you will live when you have a tenant. If you continue to live in the same house, then your home insurance should cover you. But if you live elsewhere, then you will need landlord’s insurance.
Types of Landlord’s Insurance
When it comes to landlord’s insurance, there are three different policies for rental units. These fall into an insurance category for dwelling policies.
You have three options: DP-1, DP-2, or DP-3.
A DP-1 policy covers vandalism and fire.
A DP-2 policy covers vandalism, fire, hail, and windstorm. It also covers collision should a car run into your home.
A DP3 works in a different way. This covers everything that is not excluded. It is a form of comprehensive insurance.
Deciding on which one to get is something that you should discuss with an insurance agent. He or she will be able to look at your particular situation and tell you what will work best for you.
A Quick Review
If you are a new landlord, you may need landlord’s insurance. Your home insurance will cover you only under two circumstances. One, you continue to live in the house. Essentially, you are only renting rooms, not the whole house. Two, if you have tenants for less than 4 weeks. But rather than presume your home insurance company will protect you, it is best to talk to your insurer.
You will need landlord’s insurance if you are not living in the house and are renting it out for more than a month. You have a choice of three dwelling policies: DP-1, DP-2, and DP-3. If you are looking for a comprehensive policy, then DP3 is your best choice as it covers everything that is not excluded.