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What kind of insurance do I need for my rental properties?

Renting out properties to tenants can certainly be a profitable endeavour. Earn extra income supplement your current salary and have the prospect of long-term revenue ahead of you; it definitely seems like a win-win. It’s all about finding the perfect property and understanding the nuts and bolts of what exactly is involved with renting your property out to someone. One aspect of becoming a landlord that you absolutely need to be certain of are which insurances you need.

We frequently get asked about the types of rental insurance required the amounts of coverage needed along with the responsibilities of the tenant versus the landlord when it comes to insurance associated with a rental property.

Here is a brief overview of rental properties and the insurance policies that you need in order to ensure peace of mind and a productive venture in the world of rental real estate.

Renter’s or Tenant’s Insurance

What exactly is tenant’s or renter’s insurance? Well first of all you can use either term interchangably. Secondly this type of insurance is needed when someone rents a home or condo they don’t own as they need to be responsible for covering their personal belongings and contents. For instance let’s say a covered peril ensues and in the process the renter loses some of their belongings including valuable electronic equipment or a collectible item. They would then need to file a claim with their insurer for the replacement cost of the items. What belongs to the renter must be insured by the renter themselves .

Additionally the tenant needs the liability insurance that comes as part of their policy. If someone slips and falls inside of the property their insurance would cover the associated costs. If damage occurs this again would fall under the umbrella of the liability coverage connected to their tenant’s insurance.

The important thing for you the landlord is to make sure that you get proof of this coverage from anyone to whom you rent. The insurance company should happily provide you with a copy of the declarations page showing that the required coverage is in fact in place.

Long-Term versus Short-Term Leasing

As the landlord you yourself need to cover the structure and any property owned by you (this includes any appliances and items that you may have in or on the property). While the contents and possessions of the unit will be covered by the tenant’s insurance the building and grounds are your responsibility . There will be a difference in coverage options depending on whether you rent on a short-term basis meaning to ‘guests ’ given a vacation stay type scenario or on a long-term basis—to individuals and/or families who use the dwelling as their primary residence.

In the short-term scenario first off you need to let your insurance company know immediately that you are engaging in short-term leases. Odds are the original homeowner’s policy will not suffice. With the growing popularity of of Airbnb VRBO and other programs some insurance companies will extend coverage or have separate policies for short term vacation leases. Some however will not have this available and leasing your home would actually void coverage. In this situation you may need to consider some form of commercial-based policy in which your home is then treated as a business. See our article on home-sharing to learn more about your options.

For those landlords looking to create a long-term rental situation you do need to acquire landlord’s insurance in order to cover the  building contents you own and any outbuildings on the property. You’ll also need the policy for its liability coverage.  Some policies may also cover damage done by the tenants and provide you with rental income in the case of your unit being unfit to live in after an insured peril. In the end your landlord policy will help to protect you.

Rental Property Vacancy Permit

A vacancy permit is extremely important for any landlord to consider. As you know there will be gaps in between tenants. Even in a long-term situation your renters will move out and in the interim as you are waiting to find new tenants the unit may be sitting empty. If it so happens that there is a period of time in which the property is without a renter you are going to need a vacancy permit . This is where you will need to talk to your insurance broker and find out exactly what is required to make sure your coverage remains in effect.

In fact as a landlord you probably have quite a few questions about what types of insurance you need what exactly your tenant needs and how to proceed with putting your policies into action. This is where an insurance broker can be a great asset and a discussion with one is most definitely a good place to start.