When Do You Need a Landlord Policy?

Written By Charlotte Insurance on January 18, 2022. It has 0 comments.

a landlord with landlord insurance giving keys to their tenant

Thinking of renting out your home when you move? Feel like your second home could help pay for itself when you’re not using it? If you’re considering renting your property, make sure a landlord insurance policy is part of the plan.

Here’s what you need to know.

How Do You Know You Need a Landlord Policy?

Landlord policies are designed for anyone renting out a property that they are not also occupying.

  • Renting out your home instead of selling it? You need a landlord policy.
  • Putting your vacation home on AirBnb when you’re not using it? You need a landlord policy.
  • Bought a property, fixed it up, and decided to rent instead of flip. Yep, you need a landlord policy.

Why? Because homeowners insurance will not cover the liability or property damage that occurs as a result of occupancy by tenants. The property is essentially a business and homeowners policies don’t cover business activity.

There are small exceptions to this:

  • If you take tenants one time on a very short-term basis, your homeowners policy might offer some coverage.
  • If you rent a room in your home that you still live in, you don’t need to purchase a landlord policy.

In both cases, you absolutely need to talk to your independent insurance agent, though. For a one-time, temporary rental, you may want to purchase a rider for your policy. For a room rental, you may need a new homeowners policy that provides a bit more coverage.

What You Get With a Landlord Policy

It’s important to know that landlord policies are not required by law, although your mortgage provider may require it as a condition of the loan. However, purchasing landlord insurance is a smart business decision.

Without it, you’ll have to pay out of pocket for any damage or injury that you’re found liable for, as well as paying to replace or repair the structure or property.

Landlord policies can cover multiple concerns for landlords:

  • Liability coverage when you’re found legally responsible for injuries tenants or visitors suffer while on the property.
  • Personal property coverage for any items you’ve left in the property for the tenants use (like furniture or appliances) and in service of the property (such as lawn equipment).
  • Structural damage for covered perils such as fire, storms, etc.
  • Loss of rental income when the property becomes inhabitable and needs to be repaired. During that time you can receive temporary rental reimbursement since you can’t rent it to a tenant.

Not only will your homeowners insurance policy not offer this level of protection, any claims will be denied if they occurred as part of the rental. This is why you need a landlord policy.

What About Renters Insurance?

You can require renters insurance as part of the rental agreement for your tenants. Your tenants possessions won’t be covered under your landlord policy, so renters insurance protects them. Renters policies also offer some liability coverage. It’s in their best interests to purchase coverage, and you can make that a requirement of renting from you.

It’s in your best interests to require it as well. When a tenant can recover from an accident or damage by replacing their belongings, they’re more likely to take better care of the property itself. This means you may be able to avoid evictions for non-payment and have to deal with less damage and clean up when they move out.

Ready to protect your properties with a landlord policy? Contact Charlotte Insurance today for a free quote. We can help you find the best coverage for your rental.

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