A recent Wall Street Journal article reported that America’s second largest home insurer saw a 27% increase in homeowners converting their property to a rental unit during the first quarter of this year. Many homeowners, unable to sell their homes in this economy and hoping to hang on till the market turns, are opting to become landlords. What many don’t realize is that their homeowners insurance doesn’t fit the bill. Once you decide to rent your home instead of live in it, it becomes a place of business and you need a business-oriented landlord insurance policy.
When looking for a landlords insurance quote, look for a policy that offers the most extensive coverage. Landlord insurance quotes typically depend on several factors including the location of your rental, its age, its size and your credit rating to determine premiums. On-site features such as pools and fireplaces create greater risk in the eyes of the insurance company and may increase your premium.
The basic landlord insurance policy is designed to protect you should you find yourself unable to earn income from your rental property because of damage by fire or wind, for instance, or a legal dispute between you and your tenant. Your policy will also protect you from liability if somebody is hurt at your rental property. In the case of a tenant lawsuit, some landlords insurance policies even cover legal expenses and medical costs of the injured party if you’re found liable. If you keep your personal equipment on the rental property for the tenant to use, such as a lawnmower, that may be covered under your landlord policy, too.
What isn’t covered is damage from flood (although you can get a separate policy for that). And, depending on your policy, you may or may not be covered for damages caused to your rental property by vandalism, theft, earthquake or sewer backup. All these and many other exclusions and limitations can be covered with optional add-on coverage.
You can take steps to lower your premiums such as combining your landlords policy with your other policies. Ask your agent to inspect your property to see if you qualify for discounts. Some companies will discount your policy if your rental has functioning smoke alarms, security locks and burglar alarms, or your proximity to fire stations or fire hydrants.
Many tenants assume that the landlord is responsible for the cost of replacing their personal item in the event of damage to the rental unit. Not so. Your tenant should be advised to get a renters insurance policy to protect his or her personal belongings. As a landlord, you are responsible for keeping your property up to any local and state requirements. These might include functioning fire alarms, security locks and plumbing (and having them may qualify you for discounts on your policy).