Do You Need Rental Property Insurance If You Have Homeowners Insurance?
It depends on how long you intend to lease the property, but in most cases homeowners’ insurance won’t be an appropriate substitute for rental property insurance. Having tenants on your property brings on unique risks that may not be covered by your typical homeowner’s policy, especially if you plan to lease a property for an extended period. The type of insurance you need will depend on how often you rent out your home and the duration of your tenants’ stays. These distinctions can be divided into two categories: long-term renting and frequent short-term renting.
If you have an investment property, vacation home or second home which you intend to rent to a single person, couple, or family for long periods of time you will need to purchase rental property insurance. Generally long periods of time are described as six months or longer. The same is true if you decide to rent out your primary residence for a large portion of the year. Operating a rental house increases your exposure to risks, such as liability issues related to tenants and their visitors.
Frequent Short-Term Rental
If you intend to regularly rent a property to a variety of guests for short periods of time, your property might be considered a business, and you may not be protected by either homeowners’ insurance or long-term rental property insurance. In many cases, this exposure is now excluded from long-term rental property insurance policies. Instead, to cover the associated hazards, you would need to purchase some form of commercial property and liability insurance. For example, for individuals who rent out their home or rooms through a service provider such as Airbnb, some insurance companies can provide vacation rental insurance. These policies include unique features such as bed bug and identity theft coverage.
You should be aware that although service providers themselves may offer a limited form of protection, it usually won’t be as comprehensive as the vacation rental insurance offered by an insurance company. For instance, Airbnb has a host guarantee policy covering property damage to your home up to $1 million for every listing, but the policy includes limitations that traditional insurance won’t. One limitation is that the request for coverage must be submitted within 14 days or before the next guest checks in, giving you limited time to act and assure reimbursement.