If you own a home, your homeowners’ insurance protects your home and personal property when it’s damaged by perils like fire, wind, and theft. If you plan to have tenants for a short time, homeowners’ insurance may be a better fit. However, homeowners insurance might not offer enough protection if you decide to rent out your home for the long-term as a form of income. What insurance policy do you need to protect your rental property adequately?
Rental property insurance, also called landlord insurance, is a type of property insurance that covers unique risks associated with having tenants. It covers property damage, liability costs, and loss of rental income for landlords renting their property for long periods. Landlord insurance in California provides coverage for property owners renting out one or more condos, apartments, or residential homes.
Landlords need protection from financial loss that may result from damages to a rental property due to fire, storm damage, theft, vandalism, and more. Without the landlord’s insurance, you may be financially responsible for repairs if something happens at your rental units. Also, you may end up responsible for legal fees if someone gets hurt at your rental unit and files a lawsuit.
Landlord insurance provides several important types of coverage. Depending on the policy and insurance company you select, your policy may consist of some or all of these types of insurance:
The property protection in a landlord insurance policy covers damage to the structure of your home due to any covered perils, such as fire, lightning, hail, or other covered losses. However, your California landlord insurance policy typically won’t cover your tenants’ personal property.
The liability portion of landlord insurance protects you against liability claims and lawsuits. If someone suffers an injury on your rental property, you could find yourself in a legal mess. Your liability insurance will help you legally if someone experienced an injury on your rental property, and you’ve found responsible.
For example, if a tenant falls and breaks a bone on your rental property and a court determines that you failed to maintain the stairs or railing, you could be held responsible for your tenant’s medical, legal and other costs. However, if a tenant’s guest suffered an injury on your property, the tenant’s insurance policy may cover liability for any lawsuits.
This insurance will help compensate you for lost income if a rental property is damaged in a covered peril, and you’re unable to rent out the home. Your loss of income coverage, or “rental reimbursement,” will prevent you from losing the income you would have had if you were collecting rent.
Rental property insurance in California is unique from homeowners and renters insurance; that is why you should always read your policy line by line and understand the exclusions. You’ll likely find that some things are excluded from the landlord insurance policy’s coverage. Here are a few things that aren’t covered:
The rental property insurance covers the building and any contents at the property that are owned by the landlord. However, it does not apply to any of the tenant’s personal property or belongings. For that protection, tenants will need to purchase renters’ insurance to account for their items. But if the tenant’s loss is the result of negligence on the landlord’s behalf, they are covered under the landlord’s insurance.
If you rent a portion of your home, you’re typically not eligible for a landlord policy. Landlord policies are designed for “non-owner-occupied” property — meaning you cannot live on the same property you’re renting out to tenants.
Dishwashers, laundry machines, and furnaces are not covered by your landlord policy. You’ll likely have to pay out of pocket for any necessary repairs or replacements. Also, landlord insurance doesn’t cover general wear and tear at the property. Unless your home contents are specifically insured in your policy, then insurance may respond.
Not every homeowners insurance policy provides coverage for business property. However, even if yours does, homeowners insurance usually provides minimal coverage for business property at your home. Some home insurance policies are actually entirely void if you are operating home-based business without permission from your insurer. In addition, your homeowners policy won’t typically cover liability arising from your home business, even if that loss has nothing to do with your business.