Photo credit: Jinx!; flickr.com/photos/span112
This post was written by Eric Skarnes for Simply Residential Property Management Magazine.
Whether you are currently renting out your home or considering the option, it’s important to know about the differences between a typical “Homeowner’s” policy versus a typical “landlord” insurance policy. It’s common for property owners to make the mistake of keeping their homeowner’s policy even after they have moved out and start using the property as a rental. Should you ever need to file a claim, it’s important to make sure that you have the proper coverage. Unfortunately, people often find out after it is too late, that they should have changed their coverage to a “landlord” policy.
Most homeowner policies state that your home must be “owner-occupied,” or the insurance carrier has the right to deny you any potential claim. You and your family must be living there. For example, if your home incurs fire damage and it is discovered that the fire was caused by a tenant or renter, it gives them an easy-out to deny your claim. Leaving you responsible for the entire cost of repairs! This can also apply to the “liability” portion of your policy. If your tenant forgets to shovel the sidewalk and someone slips… falls and gets hurt, or should their dog bite the neighbor, your insurance company will be quick to deny the claim. Once again, you will be left holding the bill. Insurance companies are not in the business of paying out money when they don’t have to.
Another difference between homeowners and landlord insurance is the need for “Loss of Rent/Income” coverage. This coverage is included in a landlord policy and pays you rental income should your tenant have to move out while the house is under repair due to a claim. Typically during this time period, the tenant will stop payment until the property is restored and they are able to move back in. For example, if a water pipe breaks or a kitchen fire occurs, should your tenant have to move out while the damage is repaired, you are paid the rental income by your insurance company.
And finally, just because your current insurance company had a good rate for your homeowner’s policy, it doesn’t mean that they will have a good rate for your landlord policy. Every company has their “niche” and that niche often changes over time. Now that your property has become a source of income and a positive cash flow is the goal we recommend reevaluating your insurance on an annual basis. So, do yourself a favor and shop several different companies to make sure you are getting the best coverage and price.
Eric Skarnes is the president of the Twin Cities-based Insurance Warehouse. They offer auto, commercial, life, home, business, and umbrella insurance. He can be reached at (612) 354-2040 or via email at eric@skarnesagency.com.
