Maybe you’ve decided to rent out the house that your uncle left to you in his will. Or, maybe you want to rent that spare bedroom in your own house. After all, the rental prices in California are some of the highest in the country, so finding a good tenant can be a big money-maker! Or, maybe you’d like to make some extra cash by renting your home on a temporary basis through a service like Airbnb or HomeAway.
No matter the reason behind it, taking on a renter means big things for your homeowner’s insurance. Specifically, you’ve got to think about these 4 things before you turn yourself into a landlord:
1. Home vs. business
If you make a frequent habit of renting out your home to temporary guests by using a service like Airbnb or HomeAway, there’s a good chance your homeowner’s coverage won’t apply at all.
Because your insurance company will likely argue that you’re actually running a business — and your policy was written to cover your home, not your place of business. In fact, standard homeowner’s insurance policies specifically exclude business use, meaning that your coverage would be null and void if something went wrong. Because services like Airbnb and HomeAway are so popular, this has become a major argument that insurance companies make when they deny these types of claims.
2. Liability insurance
If your best friend comes over for dinner, trips on your stairs, and breaks her leg, the liability coverage in your homeowner’s policy will kick in — meaning it will pay for her medical expenses and any legal expenses you may wind up facing. However, if your tenant trips on the stairs and breaks his leg, the same coverage likely won’t apply. If it doesn’t, you’ll personally be on the hook for medical and legal bills.
Want to avoid this nightmare? You’ll need special liability insurance. Most landlord policies come with liability coverage. The best part? You’ll have the coverage you need, whether your renter is staying a week, a month, or a year.
3. Renting your home short-term
Even if you’re renting out your home for a short period of time — like for a couple of days when your city plays host to a major event — you may run into some insurance issues. Your homeowner’s policy may cover you if this is a one-time thing, or if your renter will only be there for a few days. But even if this is the case, your policy may ONLY provide coverage if you notify your insurance company ahead of time. Some companies will require you to buy an “endorsement” beforehand that covers your renter.
The best advice? Read the fine print in your policy. That way, you’ll know exactly what your insurance company and policy require.
4. Landlord insurance
If you’re planning on keeping some of your stuff in your rental property — like those expensive stainless steel kitchen appliances, your lawnmower, or a few nice pieces of furniture, for example — your basic homeowner’s policy won’t cover them if your property is being rented out to others. Instead, you’ll need landlord insurance. If anything is damaged, your landlord insurance policy will pay to repair or replace it.
Luckily, landlord insurance can often be “bundled” with your existing homeowner’s or auto insurance policies — meaning you get everything from the same insurance company and, in return, get to take care of special discounts.
Bottom line — you can’t simply buy homeowner’s insurance and hope for the best. If you want to make sure you’ll be covered, you need to discuss your specific situation with an insurance agent. Even if you have to buy some additional coverage, it will be well worth it if the worst ever happens!
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