Updated: February 2016
Suppose you have a single-family home that you want to rent out full time. What kind of insurance do you need to help protect your place? You most likely need a landlord policy. But if you plan to have tenants only sporadically, homeowners insurance may be a better fit. Here are some factors to consider when determining what kind of insurance is appropriate for your situation.
If you're planning on renting out your home for a single occasion (to coincide with a big sporting event in your town, for instance), then it's possible that your existing homeowners policy may provide some protection, says the Insurance Information Institute. While the policy may help provide protection if you rent out your home occasionally, you may find that you cannot purchase homeowners insurance if you do not live in the home. A local agent can help you understand what types of scenarios may and may not be covered.
If you're planning on renting out your single-family home (or a second home/investment property) on an ongoing basis, then you're likely a candidate for landlord insurance, says the III, because a homeowners policy typically won't protect you in this scenario.
Like a homeowners policy, a landlord policy typically helps protect the building itself (and other structures on the property, such as sheds or fences) if there's damage from a fire, lighting, wind, hail or another covered loss. To purchase homeowners insurance, you must live in the home. If you plan to rent out the home to tenants, you'll need landlord insurance.
Other key differences between homeowners and landlord policies include:
Personal property coverage. While homeowners insurance may help protect many kinds of belongings, such as furniture, clothing and computers, landlord insurance typically only provides coverage for items used to service the rented property. So, if you leave personal items behind that are not used to service the rental property, you'll likely find that landlord insurance won't provide protection. It may, however, help cover items such as a snowblower or lawn mower that you store on site to help maintain the property.
Liability coverage. Landlord insurance typically only provides liability coverage relating to the rented premises. If a tenant is hurt in the home you're renting out and you are found legally responsible, the liability coverage on your landlord policy may help cover the resulting medical expenses or legal fees. Meanwhile, the liability portion of a homeowners policy typically covers you and relatives who live with you in the home, whether the accident happens in your home or not.
Neither landlord insurance nor homeowners insurance will typically protect personal items owned by your tenant. That's why you may want to make renters insurance a condition of your lease. Renters insurance may help protect your tenant's possessions, and also provide them with some liability protection.
It's a good idea to give some thought to the risk of inviting paying guests into your home — and read your policy or contact your local agent to make sure you have the appropriate coverages in place — before you welcome renters for any length of time.