Insuring a home you rent out

A standard homeowners policy is written for an owner-occupied residence. Renting the property out changes the risk and generally requires a different policy.

Continuing a homeowners policy on a rented property risks a denied claim, because the policy conditions no longer match the facts.

The landlord policy

Generally written on a dwelling fire form, with coverages structured differently from a homeowners policy.

Dwelling coverage for the structure, at replacement cost where available.

Other structures, such as detached garages and fences.

Landlord personal property, covering items you provide — appliances, furnishings in a furnished rental, maintenance equipment. This is generally a small limit and it is not tenant property.

Liability, covering claims arising from the property.

Loss of rental income, covering rent lost while the property is uninhabitable after a covered loss.

That last coverage is frequently underestimated. Repairs after a significant loss take months, and the mortgage continues.

Check the limit and the period covered.

The coverage forms

Dwelling fire policies come in several forms with different scope.

Basic forms cover a limited list of named perils.

Broader forms cover a longer list, and the broadest provide open perils coverage on the dwelling, meaning everything is covered except what is excluded.

The difference matters. A basic form may not cover water damage from plumbing, theft, or falling objects.

Ask which form you are being quoted and what it covers.

What is not covered

Tenant belongings. Your policy does not cover them. Tenants need their own renters insurance.

Requiring it in the lease is standard practice and worth doing, both to protect tenants and to reduce the chance of a claim against you.

Tenant liability. Their actions, their guests, their pets. Their renters policy addresses this.

Ordinary maintenance and wear. As with any property policy.

Flood and earthquake, requiring separate coverage.

Vacancy beyond a defined period. Important for landlords.

Most policies restrict or suspend certain coverages once a dwelling has been vacant beyond thirty or sixty days — commonly vandalism, glass breakage, water damage and theft.

Between tenancies, during renovation, or after a tenant leaves early, this exposure is real. Vacant property insurance is available and is more expensive.

Notify your insurer if the property will be vacant.

Liability considerations

Landlord liability is a genuine exposure: injuries on the property, dog bites by tenant animals in some circumstances, lead paint claims in older housing, habitability claims, and injuries in common areas.

Carry substantial limits, and an umbrella policy covering the rental property specifically — many umbrella policies exclude rental property or limit the number of units, so this must be confirmed rather than assumed.

Where properties are held in an entity, the policies must be written to match the ownership, naming the entity as insured.

A policy naming you individually on a property owned by your company creates a gap.

Short-term rental

A distinct situation.

Standard landlord policies generally contemplate long-term tenancy and frequently exclude short-term rental activity.

Platform-provided coverage exists and varies, with limits, exclusions and conditions that may not match your exposure.

Specialist short-term rental policies are available and are the appropriate product for anyone doing this regularly.

Operating a short-term rental on a standard homeowners or landlord policy is a common and serious coverage gap.

Room rental and house hacking

Living in the property while renting part of it sits between homeowners and landlord coverage.

Some homeowners policies permit renting to a limited number of roomers or boarders, sometimes with an endorsement.

Others do not, requiring a different form.

Disclose the arrangement and get the coverage in writing. Undisclosed rental activity is a common reason for denial.

Practical measures

Require renters insurance in the lease, with proof of coverage, and consider requiring that you be named as an interested party so you are notified of cancellation.

Document condition at each tenancy with photographs, which supports both deposit disputes and insurance claims.

Maintain the property, since maintenance-related damage is excluded and negligence supports liability claims.

Address hazards promptly — handrails, lighting, walkways, smoke and carbon monoxide alarms, which are also legal requirements in most jurisdictions.

Review coverage annually, particularly the dwelling limit against current construction costs and the loss of rents limit against current rent.

Tell your insurer everything — the number of units, whether it is furnished, whether there is a pool, trampoline or dog on the property, and what the tenancy arrangement is.

Non-disclosure to save premium is the reliable way to have a claim denied.

General information about insurance concepts, not insurance or legal advice. Policy forms, vacancy provisions and landlord obligations vary by insurer and state. Consult a licensed agent and read your policy.