When it comes to insuring your property, there are several options to choose from. When you live in a house full-time, the answer is simple: homeowner’s insurance. But when you choose to rent, there are certain risks and liability issues to be concerned about. In the event of an incident, you want to make sure that you, as the owner of the property, are covered. When figuring out what type of insurance you need for a rental property, it’s going to be rental property insurance. Rental property insurance is generally the most appropriate of those options.
What Is Rental Property Insurance?
Rental property insurance is like homeowner’s insurance. It will cover the costs of any liability costs, property damage, and also the loss of rental income. This type of insurance will mitigate any unforeseen expenses related to the rental property. Things covered are typically the dwelling itself, the owner’s personal property, and liability costs.
Dwelling Policies
There are different types, or forms, of rental property insurance. They’re known as DP-1, DP-2, and DP-3. DP stands for Dwelling Policy.
- DP-1:This is the cheapest and has the least coverage. If a certain disaster is not specifically named in the policy, it will not be covered, and no reimbursement will be provided. Any reimbursement for covered disasters are on an actual cash-value basis. This means that depreciation, or wear and tear, is taken into account.
- DP-2: This policy has broader coverage with more disasters listed in the policy. Instead of reimbursement for damages being on actual cash-value basis, it is instead based on replacement cost. The replacement cost is what it would take to go out and immediately replace what’s damaged.
- DP-3: This has the highest level of coverage and is the most expensive. Instead of only covering specific perils, all are covered unless specifically excluded.
You also have the option of certain add-ons, or endorsements, for your policy. Every insurer includes different coverage, and what is standard for one may not be for another. Vandalism or ordinance/law coverage are examples of situations that may come standard or may be offered as endorsements.
Which form you would need will vary depending on what kind of rental property you have and the amount of coverage you are willing to pay.
Do I Need Rental Property Insurance If I Have Homeowner’s Insurance?
Homeowner’s insurance is for when you own and also live in the property. It will cover the property as well as possessions up to a predetermined amount. When there are tenants on the property certain risks increase, and those risks may not be covered by a homeowner’s insurance policy. There are different types of rental property insurance, which differ based on coverage and the length of time the home is being rented for. These are Short-Term (Infrequent), Short-Term (Frequent), and Long-Term.
Short-Term Renting (Infrequent)
Infrequent short-term renting is when you are only renting your property out for a short period of time, and rarely. Depending on just how often and for exactly how long, incidents may be covered by your homeowner’s insurance. If you are only renting out your house for a week or two while traveling, for instance, you might be alright. You will want to speak with your insurer and check your policy before making any decisions. Some policies may include this kind of coverage with proper notification. If your policy doesn’t come with this option, sometimes there is an option to add it to your coverage as an endorsement.
Short-Term Renting (Frequent)
If you rent the home often enough then it could be considered a business, which is not covered by either homeowner’s or rental property insurance. So if you are renting out a vacation home, hosting an AirBnB, or something similar, then commercial property insurance would be better suited for your needs. Now that home-sharing has become more popular, there are insurers who will offer specialized policies. Those who choose to go through AirBnB, for example, will find that they offer their own form of insurance. While it may be good to have, it will have more limitations and be less comprehensive than a policy offered by a major insurer.
Long-Term Renting
Rental property insurance is most often used for renting to a single person, couple, or family, for longer periods of time. Longer periods of time would be about 6 months or more. This typically includes second homes, vacation homes, and investment properties. Homeowner’s insurance will not cover damages or liability claims that occur unless you are actually residing in the home.
Speak With An Experienced Personal Insurance Agency
Still wondering what type of insurance you need for a rental property? The quickest way to determine what is right for you is to speak with an expert. When you contact our experienced personal insurance agents at JMG, they will be able to give you the best idea of what kind of policy you will need. They will need to know all the details you can provide. These will include whether the rental is short or long term, frequent or infrequent, and how much coverage you are looking for. He or she will tell you what you need for your situation and will offer different policies based on those needs and your budget. Reach out today by phone at 1-(844)-304-7332 to start your process.
