Is Home Insurance for a Rental Property More Than for a Primary Residence?

Typically, homeowner's insurance is less expensive than landlord insurance. Insurance companies think that if you own your home and live in it, you will take care of it. If a tenant breaks a window or punches a hole in the wall, they have the option to vacate the premises. To cover the additional risk, you must pay a higher premium.

Costs

Typically, you will pay 15 to 20 percent more for landlord insurance than if you owned the property yourself. For instance, if you spend $800 per year on your home, then move and rent it out, you may end up paying approximately $960 per year. Although you pay more, you might not be covered for as many forms of damage as you would be with homeowners insurance. Wind, fire, ice, and theft are covered by landlord insurance coverage, though.

Household Security

A dwelling protection policy is another name for landlord insurance. You can purchase DP-1 to DP-3 policies. Typically, DP-1 only compensates you for the cash value of whatever you lost, which may not be much for older items. DP-3 pays replacement value, which is a better deal. In addition to protecting the house, DP plans often cover your furnishings and appliances, as well as any structures on the property, and provide liability coverage. Some plans compensate for rental income lost while the home is being fixed.

Added Coverage

If your policy does not include lost-income coverage, you can purchase it for perhaps an additional $50 each year. You can also purchase coverage that covers the cost of repairs if the air conditioner or furnace breaks down or dies. Although DP policies cover liability (medical expenses for injuries and court damages if you are sued), they may not be sufficient for a major incident. An umbrella policy costing $300 a year can provide $1 million in liability coverage. Your insurance does not cover the renter's belongings. For this, she must purchase renters insurance.

Basement Apartment

If you are only renting out a portion of your property, such as your basement or garage apartment, you do not need DP coverage. The expansion of coverage for "units rented to tenants" for an additional fee is sufficient. Do not believe, however, that because it is your home, you are exempt from informing the insurer. If you remain silent and later file a claim over the rental, the corporation may deny your claim.