Do you need rental property insurance if you have homeowners insurance?

It depends on how long you intend to lease the property, but in most cases, homeowners insurance coverage won't be an appropriate substitute for rental property insurance. The presence of tenants in a rental property engenders unique risks that won't be covered by homeowners insurance, particularly if you plan to lease a property for an extended period of time.

The type of insurance you need will depend on how often you rent out your home and the duration of your tenants' stays. These distinctions can be divided into three categories: Long-term renting, infrequent short-term renting, and frequent short-term renting.

Long-term renting: If you have an investment property, vacation home, or second home that you intend to rent to a single person, couple, or family for a long period of time, you will need rental property insurance. A long period of time generally means six months or longer. The same is true if you are renting your primary residence for a large chunk of the year. Compared to being a live-in homeowner, having a rental house increases your exposure to certain risks, such as liability issues relating to tenants and their guests. Your insurer won't cover these risks under a homeowners policy unless you are actually residing in your home.

Infrequent short-term renting: If you only intend to rent out your property for a short period of time, such as a week or a few weekends, your homeowner's insurance may indeed cover you. This coverage may come standard in your policy if you give appropriate notice to your insurer, extending the usual benefits of homeowners insurance to periods in which you are temporarily renting your property. If it doesn't come standard, you may be able to buy an endorsement from your insurer that extends your coverage to temporary rentals. Before you commit to short-term renting, you should contact your insurer to make sure it is notified and that you understand your coverage.

Frequent short-term renting: If you're planning to rent out a property regularly to a variety of people for short periods of time, your property may be considered a business, and neither homeowners insurance nor rental property insurance will cover you. Instead, you will need to purchase some form of commercial property insurance to cover the associated risks. For example, Progressive provides "home share insurance," also called vacation rental insurance, for people who rent out their homes or rooms through a service provider such as Airbnb or VRBO. These policies include unique features such as bed bug and identity theft coverage.

You should be aware that although service providers themselves may offer a limited form of protection, it usually won't be as comprehensive as the home share insurance offered by an independent insurer. For instance, Airbnb has a host guarantee policy covering property damage to your home up to $1 million for every listing, but the policy includes limitations that traditional insurance won't. One limitation is that the request for coverage must be submitted within 14 days or before the next guest checks in, giving you limited time to take action and assure reimbursement.

How much does rental property insurance cost?

Rental property insurance is approximately 25% more expensive than an equivalent homeowners insurance policy. Given that the nationwide average cost of homeowners insurance is $1,445, you can expect the nationwide average for rental property insurance to be approximately $1,800. The higher rates reflect additional risks posed to a landlord over a live-in homeowner, such as the potential loss of rental income and the injury liability posed by tenants and their guests.

If you're interested in rental property insurance, policies are offered by major homeowners insurance companies such as Allstate and State Farm, so you can easily shop for and compare rental property insurance quotes online.


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Jason Gwerder
Monday, 11 October 2021

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