Texas homeowners decide to rent out their property knowing investment properties command top dollar in today's real estate market. If you choose to rent out your existing home(s) or a new home purchase, you have to consider the difference between landlord insurance cost and homeowners insurance cost. Each policy covers a different risk, and landlord or "rental" insurance is required rather than traditional homeowners insurance.
How Long Do You Want to Rent Out Your Home?
Many homeowners that decide or are required to move choose to keep their existing home as a long-term rental income property instead of selling it. In this case, the homeowners will move out and a renter will move in. The core of a landlord or homeowners insurance policy is liability. What risks exist to your property when renting out your home? This helps to determine what and who you need to cover.
What Do You Need to Cover?
If you continue to live in the house, a homeowners insurance policy typically covers your personal belongings like furniture, clothing, computers. If you decide not to live in the house or purchase a home for pure rental income potential, a homeowners insurance policy will not cover your personal property on the premises, nor will it protect in the event of common perils like fire, storm damage, theft, vandalism, and damage caused by tenant(s).
Landlord insurance will not cover your personal property unless that property exists to help maintain the property, e.g., lawn and garden tools. The landlord insurance policy offers the best protection for your intentions in this case. It will protect against loss from the perils mentioned above and also allows a landlord to encourage a renter to purchase their own renters insurance policy to protect their personal belongings while living at the landlords property.
Who Do You Need to Cover?
We beg the question of liability again. While you live in your home, your homeowners insurance will cover against claims of bodily injury or property damage to others on your property (e.g., a slip on your staircase) caused by you, your property, or residents of your household.
Your homeowners insurance will not cover those scenarios in a long-term rental situation. Landlord insurance will protect against injuries and other liability issues concerning your rental property.
Injuries happen. Whether they happen to your renter or their visitors, you want the proper liability protection a landlord insurance policy will provide in case a lawsuit is filed. Your policy may help with medical and legal fees if you are found liable for the injury.
The answer to the question of who you need to cover is . . . your financial interests. You want to protect your family/residents/yourself with homeowners insurance if living in your home. You want to protect yourself with landlord insurance if not living in your rental home.
Make the Right Decision
Protect your investment. Though landlord insurance is not required, we highly recommend it to reduce your exposure to financial risk due to loss and liability.
Though some may balk at the additional cost, the cost in the long run of not having proper protection will prove much worse. Also, when viewing the additional premium as a business expense, it's wise to consider the associated tax deduction.
Congratulations if you decided to cross over to the exciting and possible lucrative world of rental property income.
At Insurance For Texans, we want to help you along the journey. Need insurance for your rental?
Call, email, text any questions regarding your other insurance needs.
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