Planning to get into your first rental business? Whether it's renting out your vacation home or buying homes specifically for renting out, being a landlord can be a great way to earn an income stream and build the value of an asset for the future.
But, to protect both your income and your capital asset, it's vital to make sure you're properly covered with the right insurance. Here's a handy guide to the 3 main types of insurance involved with rental homes, including what they mean for you and your renters.
Standard homeowner's insurance covers the loss of or damage to your home as long as you're living in it. This type of coverage may be sufficient for someone who rents out the home only a small part of the time -- as a part-time vacation rental, for example. You may also be able to add liability coverage for an additional fee. Homeowner's coverage, though, often excludes damage to a house that's been vacant for 30 days, so it's unlikely to be appropriate for covering a rental building that occasionally may not have tenants.
Landlord insurance is specifically designed for covering not only rental homes but also covering your business needs. Like homeowner's coverage, landlord insurance covers loss or damage to the home, but also generally includes liability coverage (protecting you in the case of injury or negligence), offers personal property coverage for your belongings in the home (such as a furnished home) and covers intentional damage by tenants. In addition, most landlord policies also provide some coverage for lost income in the form of rent you don't receive when you suffer a covered loss. As a business owner, landlord insurance gives you the most protection of both your asset and your income.
While your own (homeowner's or landlord) insurance covers your property, it does not extend to covering the property of your renters that is inside the house or apartment. For this reason, it's a good idea to encourage tenants to purchase renter's insurance to cover their own goods. Renter's insurance policies are generally very inexpensive and are available even in small increments to cover tenants who don't have expensive items.
By understanding the needs of your new rental business and how different insurance policies can protect you, you can make the best choice and free yourself from the extra worry of not knowing if you have sufficient insurance against emergencies. Contact a local agent, like House-Chilson & Associates, for more help.