Owning your home provides security and peace of mind, but owning a second home has the potential to provide additional income. In 2019, vacation rentals grew by 7%, with overall revenue being $ 87.09 billion. Renting out your home to guests can be an easy way to make money, but like any business, rental real estate also comes with risks that you should be careful about.
You may already be familiar with home and rental insurance, as well as personal property coverage. But if you are considering renting out your home, that means you are starting a business, and in such a case, standard home insurance will not suffice. Whether you are renting a room in your home or giving your guests access to the entire property, you need to educate yourself and take out rental home insurance.
Do i need insurance to rent my house?
Yes, before you rent your home you will need insurance. The type of insurance depends on the rental period of your accommodation. Your home insurance company can help you determine the type of coverage you need, but here’s a general idea.
Short term rentals
For short-term rentals, such as a weekend or a week-long stay, a home or tenant insurance policy may be sufficient, as long as you notify your insurance company that you are renting your home. However, some providers will require you to purchase an insurance policy to extend your coverage.
If you rent only one room in your home, your current home insurance policy may provide sufficient coverage. But again, it depends on the length of stay of the tenant and the number of people in your accommodation.
If you regularly rent out your home for short periods of time, that essentially means you are running a business. Home and tenant insurance does not cover business related activities. In this case, you will therefore need to take out a business insurance policy. Ask your insurer about purchasing a bed and breakfast or hotel insurance policy.
Long term rental
For long term rentals, the insurance requirements are different. If you’re renting out your home to the same people for six months or a year, you’ll need homeowner’s insurance. Home insurance policies, also known as rental insurance, offer more protection than home insurance and typically cost around 25% more.
Keep in mind that rental home insurance does not cover your tenants’ belongings. They will need a renters insurance policy to protect their belongings while they are renting out your home.
What is the difference between home insurance and homeowners insurance?
Home insurance and homeowner’s insurance share many similarities. Both types of insurance cover physical damage to the structure of your home. So, if a fire or a major storm damages the house, the losses are covered.
Home insurance and home insurance both also cover liability and personal property protection, but in different ways. Home insurance covers all of the owner’s personal effects inside and outside their property. For landlord insurance, personal property coverage generally only applies to items made available to tenants, such as a washing machine or refrigerator. A tenant’s luggage or clothing would not be covered.
There are also differences in liability coverage. Homeowners’ liability insurance covers the legal costs of the homeowner if someone injures themselves in the home or accidentally damages someone else’s property and is sued. For landlord insurance, liability coverage only applies to injuries to the tenant during their stay in the house.
The other main difference is that some rental insurance covers loss of income if you cannot rent the house after a covered loss. For example, if a hurricane destroys your Florida vacation home that you rent through Airbnb, your landlord insurance may reimburse you for all rental payments while you repair the property.
Additional coverage for your tenants
The coverage your tenants need will vary depending on the type of rental you have. Renters staying in a short-term or vacation rental probably don’t need to purchase additional insurance. If they have home or renters insurance for their primary residence, their personal property coverage will likely cover at least a percentage of their personal property while on vacation.
However, if your guest lives in your long-term rental home, they may want to consider an insurance policy for tenants. Your landlord insurance does not cover personal property belonging to the tenant, and your tenant also likely needs liability coverage in the event that they are found to be negligent for guest injuries or damage to someone’s property. else. Fortunately, tenant insurance is relatively inexpensive, costing an average of just $ 179 per year, according to the Insurance Information Institute (III).
Frequently Asked Questions
Do I need rental home insurance if I have home insurance?
The short answer is — it depends. If you rent out your home for short periods of time, your home insurance policy may provide you with sufficient coverage. However, you may need to increase your policy limits or purchase a rider policy for additional coverage. If you rent your home to the same person or group for long periods of time (think six months or more), you will need to purchase rental home insurance. If you are not sure what type of insurance you need, ask your insurance company for a recommendation.
How much does homeowner’s insurance cost?
According to the Insurance Information Institute (III), home insurance costs on average about 25% more than home insurance. As with all types of insurance, the average rate varies by state, but expect to pay around 25% more than your current home insurance premium. Home insurance is not always cheap, but it costs more than home insurance because it offers more protection.
If I have insurance with the roommate company, is that sufficient?
Airbnb and other roommates usually offer some type of insurance to people who rent their accommodation on the platform. Some people rely solely on this insurance rather than purchasing their own policy. However, rental company insurance policies don’t cover everything. Making a claim through a company like Airbnb is often much more difficult than filing a claim through your own insurance company. Additionally, rental company policies generally do not cover loss of income, which homeowners insurance covers. All in all, it may be best to spend the extra money and purchase a full rental insurance policy from your insurance company.