Many property owners rent out their properties such as apartments, vacation cottages and even residential houses. And while many assume that their homeowners’ insurance will provide coverage during the period that tenants occupy the home, this is not the case. In most instances, homeowners are left petrified when making claims for an accident that occurred while they had rented out the home. How can homeowners protect themselves from perils that occur in their rented property? Landlord Insurance is the best option for this type of coverage. If your insurance questions are more linked to strata insurance, this article can help answer them. 

What is Landlord Insurance?

Landlord Insurance is a home policy that provides coverage for homes during a period where they have been rented. As per the provisions of most insurance companies, renters are not held liable for injuries that occur on rented properties, appliance malfunctions, theft or burglary as well as naturally occurring perils such as home damages due to forest fires or hurricanes.  Check also this post about real estate insurance.

What coverage is provided in Landlord Insurance?

• Liability protection- This provides coverage for legal or medical costs that a tenant or visitor might need if they suffer injuries resulting from property maintenance issues. For instance, if a tenant falls due to icy walkways, they will be compensated for any injuries sustained. 

• Property damage- This coverage safeguards the insured against damage to the property resulting from fires, natural disasters, vandalism, irresponsible tenants and even gas/ electric malfunctions. It would be wise to choose a policy that offers a predetermined cash payment or replacement cost as opposed to the actual cash value. 

• Flood insurance- Depending on your location, you might want to consider getting a flood insurance policy. If you are located in an area that is prone to flooding, this additional coverage will safeguard you against perils that result from flooding. However, if you are located in an area that has zero or few cases of flooding, then a flooding coverage policy may be an unnecessary expense. 

• Guaranteed Income Insurance- This coverage protects defaults in payments and even late payments from tenants. 

• Emergency coverage- This policy provides coverage in tenant emergencies. For instance, a tenant can accidentally lock themselves in the home necessitating a forced entry. This coverage will cater to the costs involved in resolving such issues. 

• Additional Construction Expenses- This provides coverage for expenses that may be incurred in the reconstruction of various parts of a building after destruction. 

Homeowners Insurance 

Homeowners insurance is insurance coverage that provides coverage against damage or accidents in a property. 

What is covered in homeowners’ insurance?

• Property damage- Homeowners insurance provides coverage for damage to the insured property as a result of hail, fire, wind and even water damage. Since these policies can differ with insurance providers, ensure you know of any exclusions from your insurer. 

• Personal property- Homeowners’ insurance protects damage to personal property. As such, if your property such as appliances, furniture and clothing is destroyed say, in a fire, you will be compensated for the damage caused. 

• Other structures- This ensures structures attached to your property such as storage sheds, garages and driveways. 

• Jewellery- Jewellery, especially high-end and designer jewellery is costly. If lost or stolen, it can be expensive to replace, necessitating insurance coverage. However, most homeowners’ insurance provides limited coverage for jewellery, given the high risks involved. 

• Medical bills- These safeguard medical expenses used to treat injuries incurred on the property. 

• Personal liability- Homeowners’ insurance caters for legal as well as medical expenses that occur from the insured property. 

• Additional expenses- In most instances, homeowners often cater for additional expenses. For instance, if your home is destroyed making it inhabitable, homeowners’ insurance should cater for accommodation costs as the property is repaired. 

Let’s discuss the difference between Landlord vs. Homeowners insurance 

1. The cost 

Even when we want to safeguard ourselves from perils, the cost of an insurance policy remains vital. Some insurance policies can be too expensive, making the remittance of premiums difficult and even the deductible if applicable. 

When it comes to the cost of landlord vs. Homeowners insurance, landlord policies are more expensive, with the approximate cost being 25% more than a typical homeowners policy. The cost, however, can increase if the rental property is located in regions that are prone to more risks. For instance, properties located in areas close to forests or areas prone to natural disasters will be more expensive to insure. Other factors that will affect the cost of rental property insurance include the credit history and claims made in the past. Also, the characteristics of the home such as the availability of security or safety measures in place will affect the insurance cost. 

2. Personal property

Landlord insurance provides coverage for items owned by the property owner used to service the property. For example, furniture, appliances as well as property maintenance is insured as long it is used by the tenant. 

Homeowners’ insurance provides coverage for the property regardless of where it is used. For instance, if your homeowners’ insurance policy provides coverage for your personal property such as computers, you will be compensated if the property is damaged regardless of where the peril took place. 

3. Tenant belonging

Landlord insurance does not provide coverage for tenant belongings. Tenants are advised to undertake additional insurance to provide coverage for personal belongings. 

Homeowners’ insurance also does not insure property belonging to any tenant. 

Changing homeowners’ insurance to landlord insurance

Needs can change. And even if you have homeowners’ insurance, you might need landlord insurance if you opt to rent out your space. In this case, do you need to purchase new landlord insurance? While you can, indeed get a new landlord insurance, you can opt to upgrade your insurance policy when your needs change from owner-occupied to renter-occupied. This can be a long-term or short-term change. Your insurance provider will replace the homeowners with the landlord policy. This is a great plan when you want to travel and rent out your property. 

How can you save on landlord insurance and homeowners insurance?

• Ensure your property is properly maintained- Whether you are occupying your home or renting it out, a properly maintained property will lower your premiums. This is because regular maintenance prevents accidents from occurring. For example, keeping walkways well maintained prevents falls. Also, ensuring your HVAC system is in check can prevent leaks and even fires from occurring. 

• Ensure your tenants have renter’s insurance- Even with landlord insurance, renter’s insurance comes in handy when it comes to protecting your tenant’s property as well as liability incurred if the tenants’ guests are injured. 

• Have necessary safety equipment-Protection is always better than cure. Having safety equipment in place prevents accidents from occurring. As such, you end up making fewer claims on either landlord or homeowners’ insurance. This can get you better rates given the few claims made.