There are a few things to consider before deciding which type of insurance coverage you need if you are renting out part or all of your home or other building to tenants. The following information will help guide you through initial decision making, but it is always best to consult with your local independent insurance agent to ensure that you are adequately covered. Your independent agent will review your unique situation and provide insurance options tailored just for you.
In some instances, your homeowners policy may cover the building and your personal contents while all or part of your house is rented to tenants. Coverage issues can arise if you rent the building consistently for months or years on end without living there yourself. However, as long as you reside in the building and rent a portion of it to tenants, your homeowners policy might be adequate. This situation requires a consultation with your independent agent to assess coverage.
Dwelling Fire Insurance
A Dwelling Fire policy is likely needed if you will not be residing in the building while it is being rented to tenants. The five coverages provided in this type of policy include two required coverages and three optional coverages.
The two required coverages are:
- Coverage A – Dwelling (Covers materials or supplies needed to construct, alter, or repair the dwelling if loss occurs due to a covered peril.)
- Coverage B – Other Structures (Covers structures on the premises that are not attached to the primary house.)
The three optional coverages include:
- Coverage C – Personal Property (Covers your personal property on the premises. This does not provide coverage for tenant’s personal property.)
- Coverage D – Fair Rental Value (Coverage for lost rent if tenants are not able to live in the apartment due to a covered peril.)
- Coverage E – Additional Living Expense (Coverage for additional expenses incurred from a covered peril.)
Businessowners Insurance or Businessowners Package (BOP)
When your rented or leased building is larger than a family home, you need businessowners coverage to protect your assets. For landlords of apartment buildings, complexes, or office spaces, adequate protection can be obtained economically by combining several different businessowners coverages into a Businessowners Package (BOP) policy.
Typical coverage needs include:
- Business Property (Covers the building, equipment, and income in the event of a covered loss.)
- Business Liability (Covers your buildings in case an accident occurs, including slip and fall mishaps.)
- Business Crime (Coverage for theft, forgery, robbery, vandalism, and employee dishonesty.)
- Building Ordinance (Covers the increased cost to comply with ordinance laws if you need to repair or remodel your building after a covered loss.)
There are additional businessowners coverages you can add to your package to ensure that you are protected. Your independent agent will review your needs and provide options to protect your assets now and in the future.
And, if you haven’t already drawn up your rental or lease agreement, consider adding a stipulation that tenants must purchase and maintain their own renter’s insurance policy for the duration of the lease agreement. This will provide a layer of protection for tenant’s property and liability in the event of a loss.
Again, your local independent insurance agent can provide the best advice regarding the coverages you need to protect your assets when you rent to others.