Since the real estate market in most areas of the country has not started to rebound, many people are starting to rent out their homes instead of selling them. Some people do this because they simply cannot sell their home and are becoming accidental landlords. If you find yourself dipping your toes into the rental market as a homeowner, you need to make sure that you have the proper insurance to cover your home and property.
Homeowner vs. Landlord Insurance
When you are a homeowner, you get a homeowners insurance policy. This policy covers the entire structure of your home, your home’s contents, and provides some level of liability protection for you and your family. When you become a landlord, you don’t need some of that protect. As such, you get what is known as a fire policy.
A fire policy is designed specifically for landlords. It is coined from the idea that you are protecting your home from just fire. But, really it means that you are just protecting the structure of the home. As a landlord, you do not insure the contents of the home. That is your renter’s responsibility to provide coverage for his or her items with renter’s insurance.
Additional Insurance Protections For Landlords
As a landlord, you do potentially open yourself up to additional liability. Since you do have other individuals living in a property you own, you could potential find yourself involved in litigation simply as the homeowner. As a result, you should consider increasing the amount of personal liability coverage you have in case you need to protect yourself. I am a big fan of purchasing umbrella insurance to protect homeowners from increased liability.
Many landlords purchase an umbrella insurance policy to cover themselves should any liability issues arise. If you are not protected, you may be forced to sell assets to pay any judgments or settlements including the house you rent.
There are many reasons for becoming an accidental landlord. You may be forced to keep your home instead of selling because your house is underwater, you have equity but don’t want to lose it, you cannot get a short sale, or maybe they don’t want to hurt your credit, or maybe you can just afford to sell and pay the closing costs. Some people are taking advantage of the low real estate prices to buy another home and are simply renting out their first home until the real estate market improves. Whatever the case may be, when you become a landlord, your insurance needs change dramatically.