What Insurance Do I Need if I Rent Out My House? Key Policies

Renting out your home can be a great way to generate extra income. However, it often comes with added responsibilities, including ensuring you have the right insurance coverage. 

Many homeowners wonder, "What type of home insurance do I need, and will my homeowners insurance go up if I rent out my house?" 

While your standard homeowners insurance policy may seem sufficient, it often falls short in protecting rental properties. Insurance for a rented property typically requires landlord insurance – which may cost more depending on various factors. Moreover, depending on your situation – your tenants may need HO-4 insurance, also known as renters insurance. 

Choosing the right policy can help protect your property and rental income and reduce financial risks.

Key takeaways

• Standard homeowners insurance typically does not cover rental properties adequately.
• Landlord insurance helps protect your property, income, and liability risks as a landlord.
• Renters insurance (HO-4 insurance) is essential for tenants to protect their belongings and personal liability.
• To properly insure a rental property, switch to landlord insurance, encourage tenants to get renters insurance, review exclusions with your provider, and compare quotes to find the best coverage for your needs.

Do I need to change my homeowners insurance if I rent out my house?

Wondering, “Do I need homeowners insurance for a rental property?” Well, you typically need to change your homeowners insurance into landlord insurance for a rental property. 

A standard homeowners insurance policy is designed for owner-occupied properties and may not provide adequate coverage when renting to another family. 

Who pays home insurance when renting is an essential question to consider as a landlord, and the answer often depends on policy specifics. Once you rent out your property, it’s classified as a business activity, which requires specific insurance, such as landlord insurance.

As a property owner who plans to rent a home and seek relevant insurance, you may question whether you need landlord issuance.

The quick answer is yes if you want comprehensive coverage. 

Landlord insurance includes protection for your property, liability risks, and potential income loss. This is crucial because renting increases liability risks, such as tenant injuries, which are covered under landlord liability insurance. 

In addition, rental property insurance can cover damage to the home caused by unforeseen events, ensuring you're financially secure.

Reasons why you should consider alternative coverage when renting your home

When you sign a lease with a tenant, you’ll likely need to switch from homeowners insurance to landlord insurance – also known as rental dwelling property insurance. This coverage helps protect against risks a standard home insurance policy doesn’t address. If you're exploring insurance for renting out your house, landlord insurance is the best choice to ensure comprehensive protection for your property and rental income.

Here are a few potential reasons to consider alternative coverage when you rent your home:

• Tenant belongings: Your tenants will bring their own belongings, so you need a policy that covers only your personal property, such as appliances or fixtures.
• Rental income protection: If your property is damaged and becomes uninhabitable, you could lose rental income. A landlord policy could protect against that loss.
• Increased risk: Insurers see rental properties as riskier because tenants may not care for the property as thoroughly as a homeowner would.
• Higher maintenance costs: Renting out a home may lead to more wear and tear, which isn't typically covered under homeowners insurance.
• Affordability: According to the Insurance Information Institute, a landlord policy generally costs about 25 percent more than a standard home policy. While landlord insurance cost varies, it provides valuable protection, often saving money in the long run.

Depending on the type of policy and your circumstances, a rental dwelling policy may cover appliances and permanent fixtures on your property. . If a covered event prevents you from renting out the home, it may include fair rental value coverage to reimburse you for lost income. 

This makes it an essential choice for landlords looking to protect their investment.

Does homeowners insurance cover a rental property?

In most cases, standard homeowners insurance doesn’t cover rental property. 

When you rent out your property, it becomes a business asset. This often creates more risks as tenants usually don’t care for a rental property as carefully as a homeowner would.

If you’re asking, “What insurance do you need when renting out your house?”, the answer often involves switching to landlord insurance. This type of policy could provide essential coverage for property damage, liability risks, and even loss of rental income. Without this specialized insurance, relying on a standard homeowners policy could leave you exposed to significant financial risks.

Buying insurance when renting a house or insuring a rented property may require additional endorsements or policies to ensure adequate coverage.

For instance, if your rental property sustains damage while occupied by tenants, your home insurance coverage may not apply unless you have made the necessary changes. 

Additionally, is homeowners insurance more expensive for rental properties? Yes, it often is. Landlord policies typically cost more than standard homeowners insurance due to the increased risks associated with rental activities. However, the extra cost could provide crucial protection that standard policies lack.

When does home insurance cover a rented property? 

Insurance companies generally have rules and  restrictions about insuring rental properties, so it's important to speak with your agent about your specific circumstances before choosing a policy.

In most cases, standard home insurance covers occasional renting depending on factors such as the number of guests or the length of the stay. For example:

• House insurance when renting for a short-term period: If you rent out a room for a weekend or less than one month in total over a year, some policies may extend coverage.
• Home Sharing Services: Insurers may offer add-ons for properties used occasionally for platforms like Airbnb.

However, if the property is used for longer-term leases or exclusive rental use, you’ll typically need dwelling property insurance, which isn’t included in a standard homeowners policy. 

One exception is House & Property insurance, which can be customized to fit how you use your home. Speak with your agent today to explore options tailored to your needs.

Remember, though, that rental dwelling insurance coverage under these policies depends on approval from the carrier’s underwriting team.

Does landlord insurance cover a rental property?

If you plan to rent out your home long-term, you’ll need landlord insurance. 

This policy helps cover the dwelling, any unattached structures on the property, and your personal property used for maintenance. 

It also includes liability coverage and may reimburse you for lost rental income if the property is damaged by a covered event, such as a fire, and becomes uninhabitable.

What landlord insurance covers

Landlord insurance coverage options typically include:

• Dwelling coverage: It helps protect against physical damage to the property caused by events like wind, hail, or fire.
• Other structures coverage: This policy covers structures not attached to the main building, such as fences or sheds.
• Personal property coverage: It protects items you use to maintain the rental property, like lawnmowers or snowblowers.

Now that you know what this insurance covers when you rent a house, let’s find out what landlord insurance does not cover. 

What landlord insurance doesn’t cover

Landlord insurance for a rental home has its limits. Here’s what it doesn’t typically cover:

• Routine maintenance: Regular upkeep and repairs aren’t covered.
• Shared property: If you live on the property and rent out a portion, such as a room, landlord insurance may not apply. In this case, consider adding an endorsement to your house insurance policy to cover rented property.
• Tenant’s belongings: Landlord insurance doesn’t protect a renter’s personal property. For example, if a tenant’s furniture is damaged in a fire, their renter's insurance covers it, not your landlord's policy.

Common exclusions

Landlord insurance policies could also exclude certain risks, similar to standard home insurance policies, such as:

• Earthquakes and other earth movements.
• Volcanic activity.
• Erosion and mudslides.
• Sewer or drain backups.
• Neglect of the property.
• Acts of war.
• Asbestos removal.

If you’re wondering whether landlord insurance covers tenant damage or if it falls into exclusions, it depends. 

Most policies cover accidental or unexpected damages caused by tenants, but intentional damage is often excluded. 

If you want to know more about renting a house and the insurance options as a renter or a landlord, it’s better to speak with your insurer and agent to explore the specifics of your coverage, endorsements, or additional policies to fit your needs.

Tips on insuring a rental property with the right coverage

If you want to insure your rental property properly, follow these recommended tips:

• Assess your risks: When choosing coverage, consider the location, property type, and tenant-related risks.
• Upgrade to a Landlord Policy: If you need insurance for renting a house for longer periods, switch from homeowners insurance to a landlord insurance policy that includes liability protection, loss of income, and property damage coverage.
• Encourage Tenants to Get Renters Insurance: Since you can’t get renters insurance if you own a house, ensure your tenants have HO-4 insurance to protect their belongings and reduce liability risks.
• Review Policy Exclusions: Speak with your insurance provider and agent to identify exclusions and consider endorsements or add-ons as needed.
• Compare Costs: Research  landlord insurance costs from multiple providers to find affordable yet comprehensive coverage.

Still have questions?

Want to know more about what insurance you need to rent out your house? Here are some frequently asked questions:

What is the difference between renters insurance and landlord insurance?

Renters insurance – or HO-4 insurance – is designed for tenants. It could help cover their personal belongings and liability but not the physical structure of the property. On the other hand, Landlord insurance protects property owners and includes property damage, liability, and rental income loss. 

Do I need to change my home insurance for an Airbnb?

Yes, you may need to change your home insurance if you plan to rent out your house as an Airbnb. You’ll likely need an endorsement for your home insurance or a specialized home-sharing policy. Make sure to discuss these options with your insurer and agent to ensure adequate coverage.

Does an umbrella policy cover rental property?

An umbrella policy could provide additional liability coverage beyond the limits of your landlord insurance. It’s a valuable safeguard for landlords who want extra protection against major lawsuits or claims, such as tenant injuries or property damage.

Why does a renter need liability insurance?

Renters need liability insurance to protect themselves financially if they accidentally cause damage to the rental property or if someone gets injured while visiting. This coverage could save renters from costly lawsuits and out-of-pocket expenses, making it an essential part of HO-4 insurance.

Can you have homeowners insurance and renters insurance at the same time?

Yes, you can have homeowners insurance and renters insurance simultaneously, but they are typically for different properties. For example, if you own a home but temporarily rent another property, you can maintain homeowners insurance for your owned home while having renters insurance for the rental property to protect your belongings and liability.

Can I get renters insurance if I own my home?

The answer to “Do I need renters insurance if I own a home?” is yes. You can get renters insurance even if you own your home. Renters insurance is specifically for protecting your personal belongings and liability in a rental property, while homeowners insurance covers your own home. If you're renting a different property while still owning your home, having renters insurance is a practical choice to ensure coverage where you reside.

Is homeowners insurance higher for rental properties?

Yes, homeowners insurance is typically higher for rental properties. This is because rental properties are considered a higher risk due to factors like tenant-related damages and the absence of the owner living on-site. Specialized landlord insurance is often recommended for rental properties, offering coverage tailored to these risks.