If you own a home but need to move to a new location, renting out your home is a good way to cover the mortgage without having to go through the hassle of selling. If you ever need to move back to the area, you can move back into the home! This arrangement works out well for many homeowners, but there is a mistake that's made all too often -- forgetting to buy landlord insurance. Even if you're only renting out one home, you are a landlord, so you need the protection this type of insurance offers. Here's a closer look.
What is landlord insurance, and what risks does it cover?
Landlord insurance is available to anyone who rents one or more houses or apartments to tenants. Typically, there are three main sub-parts of a landlord insurance policy.
Property damage insurance is similar to homeowner's insurance, but designed for people who do not live in the homes they own. It covers any damage that occurs to the home's structure due to natural circumstances or the action of your tenants. For example, if a tenant were to start a fire in the living room, your property damage insurance would compensate you for the damage the fire caused. It would also compensate you if a storm were to blow the roof off the home or leave dents in your siding.
Liability insurance protects you if someone were to become injured on the property. It would cover the person's medical expenses, along with any legal fees you incur if someone were to sue you after becoming injured on the property. This is very important since otherwise, you could be on the hook to pay if a tenant's guest became injured in the rental home.
Loss of income coverage protects you if your rental home should suddenly become un-rentable. It provides funds to replace your rental income for a certain period of time after an incident that makes the home unable to be lived in. For instance, if a hurricane blows the home to the ground, your landlord insurance company may give you six months of rental payments so you're not left without this cash flow as you re-build. The exact amount you'll be compensated -- and for how long -- varies by the policy.
What can happen if you do not have landlord insurance?
Landlord insurance is not typically required by law, but the consequences of not purchasing such a policy could be quite grave. If someone were to become injured on the property or the house were to burn down, you could be out thousands of dollars. Many landlords are forced to file bankruptcy following such incidents if they do not have an insurance policy.
Where can you buy landlord insurance?
Many insurance companies that offer business and homeowners insurance policies also sell landlord insurance. Depending on the company, they may sell this insurance as one policy that covers all three of the items described above, or they may recommend that you buy three separate policies -- one for each of the items above. Before you purchase a landlord insurance policy, check to be absolutely sure it covers property damage, liability, and loss of income.
The cost of landlord insurance policies varies widely based on property value, the amount of your rent, and the deductible you choose. To make sure you're getting a fair price, get estimates from several different insurance agencies before you buy. And don't just go with the cheapest quote, either. It's often worth it to pay a little more for insurance if it means you're working with more reputable company that makes filing claims easier.
Share6 July 2017
I still remember the first time I had to chose an insurance policy; I was 17 years old and had just saved up enough money to afford my very first car. I was so excited to begin driving, but overwhelmed with all of the different auto insurance options. My father helped me chose a full-coverage policy that would cover the cost of my car if it were to become damaged in an accident. When I inevitably caused a small fender-bender as a new driver, my insurance company paid for my car repairs, so it sure was the best policy for me! Now that I am older and have learned a lot about home insurance and other types of insurance, I thought I would make a blog to help others who need insurance advice, like what my dad gave me. I hope I can help you make wise insurance decisions!