Here are 3 things you need to know about becoming a landlord
Do you own a home & want to rent it out to tenants? Or you are working with a real estate agent to purchase an investment property? Then read on as we explain the must know details about becoming a landlord or operating a property with landlord insurance:
What Kind Of Insurance Do I Need To Rent My House Out?
1) You MUST alter your existing insurance. Your local agent or insurance broker must consult with you to convert the insurance that was covering your home as a primary residence & have your updated policy reflect that it is an investment property. The coverages are going to be pretty similar. There will be coverage to rebuild the main structure, coverage for a limited amount of property & liability for occurrences on the premises. As the owner of the property, if you decide to rent out your home to tenants, your insurance company has no way of knowing that the home is being rented out. For this reason, it is critical to call your insurance agent and notify them of the change in occupancy so they can create an insurance policy for you that covers the change in risk exposure (having a tenant in the home).
How Much Does Landlord Insurance Cost?
2) You can typically expect landlord insurance to cost more than regular home insurance. Why? Because when you are the primary occupant of the property, insurance carriers can use data based on your credit history & loss history to calculate your likelihood of causing a claim. Since no information is provided about your tenant, there is more assumed risk to cover them, and thus the premium is typically higher. This is not a daunting increase however, and generally we find the difference between homes that are primary occupied and homes that are rented out, there is only about a 10% difference in the average insurance premium.
Does My Home Insurance Cover My Tenant?
3) To limit your likelihood of having tenant related claims, do your due diligence during the application process. Craft a 12-month lease agreement, take a security deposit, restrict tenants that have aggressive breeds of dogs & it should be a mandatory requirement under your lease that your tenant carry their own renter’s insurance to protect you for liability reasons. Their personal property is NOT covered under your landlord insurance. Tenant insurance, or renter’s insurance” is very inexpensive and will generally range between $10-$20 per month for the tenant, depending on how much of their personal property needs to be insured. Requiring your tenant to purchase their own insurance limits your liability as the landlord should there be a mishap or accident on your property.
Learn more about Landlord Insurance by calling us at 703-430-1200 and speaking with an insurance expert!
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