Although rental property insurance coverage will vary from one policy to the next, they typically provide coverage for the dwelling or structure, the landlord’s personal property and liability, as well as loss of rental income due to a covered claim. Although coverage is similar to a traditional home policy, a long-term landlord policy has unique features to account for the increased risk of renting to tenants.
Dwelling Coverage
Rental property insurance covers physical damage to your dwelling, meaning damage to the structure of the home or condominium. For example, coverage should extend to the walls, roof and other permanent fixtures – but there would not be coverage for the tenant’s personal belongings.
Landlord’s Personal Property
Unlike renters insurance, rental property insurance does not cover the personal property of tenants inhabiting the property. However, rental property insurance will often include coverage for items left onsite by the landlord. For instance, if a snowblower is left at a rental home and it is damaged by a fire—and fire is a covered peril in the policy—damage should be covered by the landlord’s rental property insurance. On the other hand, if a tenant purchased furniture that is damaged by the same fire, those items would not be covered by this policy.
Liability Coverage
Liability coverage will protect a landlord for legal and medical costs associated with someone being injured on a rental property. If a tenant or visitor is injured on the property, and the landlord is responsible for the injury, rental property insurance should cover these costs up to the policy limits. Additional liability protection can be purchased with a personal or commercial umbrella policy – depending on eligibility.
Loss of Rent Coverage
This coverage provides protection against lost rent payments if a property is uninhabitable due to a covered loss. For example, if a fire is covered under a typical rental property policy, and the resulting damage has caused the unit(s) to become uninhabitable, loss of rent protection should replace a tenant’s payments if he or she is no longer bound to the terms in the lease agreement. Coverage typically extends for a defined period of time and/or predetermined dollar amount – but other insurance providers may extend landlord protection based on “actual loss sustained”.
Most insurance companies define a short-term rental as less than 6 or 12 months – but this may vary from one insurer to the next. In 2007, when Air Bed and Breakfast (Airbnb) first came into existence, property owners began renting their homes and other properties on a daily, weekly and/or monthly basis. One of the challenges actuaries continue to face is reliable claims data for these exposures.
In the absence of this valuable information, it has been increasingly difficult to collect the appropriate premium under a typical long-term home or rental policy. As a result, most insurance companies have implemented coverage exclusions if a property is rented out on a short-term basis. On the other hand, a handful of insurers are now providing home-sharing endorsements and free-standing policies to adjust for these sorts of risks.
Consult with one of North Shore Risk Management’s professionals to make sure you have the proper coverage.
