Doesn’t My Insurance Cover That?

If you have to ask the question, you might already be feeling a little queasy! At first thought, having Homeowners Insurance if you’re the landlord might seem more than reasonable. But there are reasons why a Landlord Policy is required instead.

Most homeowner’s policies cover owner-occupied, single-family residences. But if you rent out your home regularly, your homeowners insurance won’t work. There are a few exceptions, for example, a homeowner who rents out the basement would not need a Landlord Policy, nor would a homeowner who rents out the home for a few weeks every summer. Instead, this article is for those who rent out a home full time.

Renting your home. When you rent out a home on a full time basis, you have an increased responsibility to cover injuries to your tenants and to the guests of your tenants. And there are other risks that have to be covered. Typically, tenants do not care for your home as well as you do, resulting in maintenance issues that can lead to injury. And very often, a tenant is less likely to be familiar with the location of water shut-off valves or circuit breaker. Though if you work with Eagle Management, we not only show your tenant where the water shut offs and circuit breaker are, but show them a whole lot more during the walk-through.

Insurance coverage. When you become a landlord, be sure to call your insurance agent and request a Rental Dwelling Insurance Policy (also known as a Landlord Insurance Policy). According to Jimmy Reid, an Agent from State Farm Insurance in Rockville, MD, there are three things a landlord should look for in a Rental Dwelling Insurance policy. They are:

  1. First, a landlord needs coverage on the actual structure of the home. Your insurance coverage is for losses that are sudden, or accidental. It is not meant to cover gradual wear and tear or deterioration. However, keeping your house properly maintained could help prevent accidents and therefore, future losses.
  2. Landlords should also have loss of income coverage (up to 12 months). If repairs are major enough that you are prohibited from having a tenant, you want insurance coverage that will help replace the income you lost during the reconstruction period. And in case you’re wondering, there is no insurance available for the tenant who is not paying the rent.
  3. Finally, be sure your policy includes liability in the event you are sued. And by the way, this is business liability coverage (not personal liability) because it’s your business – you are the landlord.

A note about condos. A master policy for a condo covers the entire building including common areas. However, if you are renting out your condo, you still need separate unit owner insurance. For example, if a loss within the building starts in your unit, the master policy will cover the entire loss, but then you, as the owner, can be assessed up to $5,000 of the master policy deductible.

Click here for Part 2 of this article on Renters Insurance.

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