If you’re renting out your home, it might not be covered by home owners insurance, so look into landlord insurance instead.
Homeowners insurance covers your house if it burns down, your possessions if there’s a break-in, and medical and legal bills if someone gets hurt on your property. Problem is, homeowners insurance might not offer protection if you decide to rent out your home. Landlord insurance does. Set aside half a day to research policies.
Homeowners insurance typically covers owner-occupied, single-family residences, says John W. Saunders, president of Slemp Brant Saunders, an independent insurance brokerage in Marion, VA. When your home doesn’t meet that definition because it’s being rented out regularly, it’s no longer covered.
Most homeowners policies will cover an occasional short-term rental if, say, you’re going away for a few weeks, says Dave Millar, a partner at Riley Insurance Agency in Brunswick, ME. “But if you have a summer home you’ve decided to use as an income property and are putting different people in there every week,” he explains, “that’s a lot higher risk for the insurance company.”
Landlord insurance typically covers the house itself, other structures on the property such as sheds, the owner’s possessions (but not the tenant’s possessions), lost rental income if the house is damaged and uninhabitable, and some liability protection for the owner in case of injury or a lawsuit.
When you decide to become a landlord, inform your insurer and ask about a specific landlord insurance policy, sometimes known as a dwelling fire policy or special perils policy. Coverage from a basic landlord policy isn’t quite as broad as a homeowners policy, says Bob O’Brien, vice president of Noyes Hall & Allen Insurance in South Portland, ME, but it includes big risks like fire, wind, theft, and ice damage.
Also consider an umbrella policy that provides additional liability protection beyond the limits of your landlord policy. “If you’re talking about owning more than one house, and your net worth is starting to build up, then you should consider an umbrella policy,” says O’Brien.