The Effects of Renting Your House on Home Insurance

As a homeowner, you want to protect your investment with enough insurance coverage to safeguard your assets in the case of an accident or natural disaster. As a landlord who rents your primary residence to tenants, you need to be even more vigilant when choosing an insurance policy. Insurance policies for owner-occupied and tenant-occupied residences are different.

Changing Insurance

If you convert your primary residence to a rental home, your your homeowner's insurance policy must be changed to reflect tenancy changes. When a home is your primary residence, your insurance policy covers both the dwelling itself and its contents in case of fire, theft, vandalism or most acts of God. As soon as you convert your home to a rental, however, you no longer need coverage for the contents of the home. Notify your insurance carrier that you are renting out your home. Failure to do so can nullify your policy if something happens to the house.

Tenant Occupied

A landlord insurance policy covers your property or if anyone gets hurt inside the dwelling. Frequently, when you change your owner-occupied policy to a tenant-occupied policy, your insurance premiums will drop, possibly as much as 20 percent, according to insurance specialist June Walbert. This is due to not needing coverage for your personal belongings. Insist that your renters obtain renter's insurance for their belongings so they can be replaced in case of loss, damage or theft.

Landlord Protector Policy

In some states, you may be required to buy a landlord protector policy instead of a homeowner's policy if you own more than two rental properties, according to Judy Tremore, author of "The Everything Landlording Book." In some states, this is also known as multi-peril insurance. Ask your insurance agent if your state requires a landlord protection policy.

Considerations

If you rent your home furnished, you will need to carry insurance coverage for your furniture and any other belongings you leave behind. Keep in mind that your tenants will still need insurance coverage for their personal property. When deciding how much rent to charge, take into account the cost of insurance. A landlord policy compensates you for any lost rent if your home is deemed uninhabitable due to a covered claim for damage. Like your regular homeowner’s insurance policy, a landlord policy does not cover floods.

References

• Kiplinger; What to Know if You Rent Out Your House; Kimberly Lankford; December 2009
• "The Everything Landlording Book"; Judy Tremore; 2005
• Insurance Journal; As Homeowners Unable to Sell Become Landlords, Insurance Needs Change; J.W. Elphinstone; August 2009