We are finding that more and more of our clients are renting out their homes on either a short- or long-term basis. It could be a second home, an investment property, or even the basement or a spare room in your house. Depending upon the rental scenario, your homeowners insurance policy may not properly cover you. You will need a more specialized policy.
Short-Term Rentals/Primary Residence
If you are planning to rent out all or part of your primary residence for a short period of time, for instance, a week or several weekends, there will likely be two insurance scenarios.
Some insurance companies may allow a policyholder a short-term rental. Other companies will require an endorsement to the existing policy to provide the proper coverage. If you plan to rent our your primary residence on a regular basis for short periods (think Airbnb), then this is considered a business for insurance purposes and will not be covered by your homeowners insurance policy. Proper coverage would require the purchase of a business policy.
Long-Term Rentals/Second Home
If you are looking to rent out your home for longer periods of time like six months to a year, you will likely need a rental dwelling policy. (This would also include vacation homes and investment properties.) Rental dwelling policies provide the proper protection for landlords on their properties, and typically cost about 25 percent more due to the increased risks.
Rental dwelling policies provide property insurance coverage for physical damage to the structure of the home plus coverage for personal property left on site for maintenance or tenant use like appliances or yard equipment.
The standard policy will also include liability coverage if a tenant or guest is injured while on the property. It will also cover legals fees and medical expenses.
Most rental dwelling policies also provide coverage for the loss of rental income while the property is being repaired due to a covered loss.
As the landlord, your coverage is only on the structure itself and your financial interest in it. Your tenant’s personal possessions are not covered under your policy. In order to avoid disputes in the event of damage to the renter’s belongings, many landlords require a tenant to buy renters insurance before signing a lease.