You need insurance geared to landlords if you rent out your home. A standard home insurance policy is designed for homeowners who live in the house. It includes liability protection and coverage for the actual structure as well as for personal belongings.
A landlord policy provides coverage for the property as well as special financial protection you need as a landlord. The insurance covers the house against such hazards as wind, hail, fire, lightning and others defined in the policy, much like a home insurance policy. It also includes coverage for other structures on the property, such as garages and sheds. The coverage for other structures is typically limited to 10 percent of coverage on the home, according to the Insurance Information Institute (III).
The policy also covers any belongings you leave in the house for the tenants to use, such as furniture, lawn equipment and applicances. Do a complete inventory to make sure the landlord policy provides enough coverage for your stuff. Keep in mind your policy does not cover the tenants' belongings. Tenants can purchase renters insurance to cover their possessions.
Another important element of a landlord policy is coverage for lost rental income. If the house becomes uninhabitable because of damage by a covered hazard, this coverage reimburses you for any rental income you lose while the home is undergoing repair, usually up to a year.
As a landlord you also need liability protection in case a tenant is injured on the property and sues you. Usually the coverage would pay your legal fees, protect your assets if the tenant won the suit and cover the tenant's medical bills for treatment of injuries. You can also purchase an umbrella policy to provide additional liability coverage.
Expect to spend a bit more for a landlord policy than for a standard home insurance policy. Landlord policies usually cost about 25 percent more than home insurance because of the additional financial protection they provide, according to the III.
Before renting out your home, talk to your insurance company about all the insurance implications.
For more, see "Home insurance tips for the accidental landlord."
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