Every landlord needs to insure their property. However, the type of insurance can get confusing, but have no fear. Your Landlord Resource has put together a guide to help you understand all the different aspects of rental property insurance.
Let’s start with the differences between a homeowner’s policy and landlord or rental dwelling policies.
Homeowners VS Dwelling Policies
Suppose you own and reside in a single-family home or a condo. In that case, you likely are insured with a homeowners (HO) policy with coverage for liability, fire, water damage, and personal contents. For instance, in the unfortunate event an electrical fire destroys your home and all your personal belongings from your TV and appliances to your clothing and laptop, your homeowner’s insurance policy will likely cover the replacement of these items, along with the structure of the home. It will also provide you with another home to live in while you are displaced for repairs. Often, if you live in a flood, earthquake, or wildfire zone, you would have to add this coverage in the form of an endorsement to your homeowner’s policy. Your HO coverage has different levels of coverage.
Because we are focused on covering landlords and their insurance, I will not discuss the variety of HO policies offered. For additional information, please read this article: HO3 Vs HO6 Home Insurance Policy //What’s The Difference In 2022?
Converting Your Home Into a Rental
Now let’s say you are moving from your first home into a nicer, bigger house in a new neighborhood, but you are holding your first home to use as a rental. Once you convert a home into a rental (which you no longer reside in), it typically is no longer covered under a homeowners policy. Instead, the home is deemed a business, and due to the increased risk of liability, insurance companies will require you to take out a “dwelling policy.”