Are you moving to a new house and plan to turn your former residence into a rental? Do you have a beach cottage to rent periodically for extra cash? Have you invested in residential properties to rent long-term? In each scenario, you’ll need more than simple homeowners’ insurance.
Of course, you need a homeowner’s policy for the house you live in, but for any residential property that you rent out for a long period of time, you need landlord insurance. A landlord policy protects you and your property in case of tenant-related damages, certain disasters, and tenant liability claims. Coverage is generally intended for one to four units, such as a condominium and single- or multi-family homes, that you rent to others.1
The cost of landlord insurance depends on where your property is located, the type and size of the property, the volume of rental activity, and the deductible and coverage you choose. Generally, the cost is about 25% more than a standard homeowner’s policy.2
Some homeowner policies may cover a brief one-time rental, or you may need an endorsement or rider added to your policy to provide the protection you need (e.g., short-term home-sharing endorsement coverage).3 If you plan to rent your property frequently for short periods (e.g., Airbnb), some insurers consider this a business and require a commercial policy. To be properly covered, you will need an appropriate policy, along with a business license or short-term rental permit to comply with local regulations. Check with your insurer and local government for exact requirements.
Another point to bear in mind: if you plan to acquire a mortgage to purchase rental property, lenders require proof of appropriate insurance before issuing a loan. For more complete and unbiased information, check with the State Departments of Insurance, the Insurance Information Institute (iii.org), and the National Association of Insurance Commissioners (NAIC).