Rental properties represent a major investment for anyone. Failing to have the right protection could compromise that investment. Today, there are a lot of different insurance options to choose from. Contrary to popular belief, homeowners’ insurance alone is not sufficient to protect landlords and their investments. It is important to become familiar with what each type of protection offers and the difference in landlord insurance vs homeowners insurance, so landlords can make an informed purchasing decision.
What Does Homeowners Insurance Cover?
Homeowners insurance provides a wide range of coverage options. Astute investors will find there is a significant amount of crossover between the protection offered by landlord insurance and homeowners’ insurance. The big difference between the two is homeowners’ insurance only applies if the homeowner resides in the property alongside the tenant.
Protection From Disasters
Homeowners’ insurance provides full protection from natural disasters. Standard cover will account for fire damage, wind damage, hail, flooding and other covered events.
This will ensure the dwelling can be repaired or completely rebuilt. Naturally, it depends on the amount of coverage the policy provides, but it should be worth at least as much as the cost of replacing the dwelling.
The majority of personal property is covered. A standard homeowners’ insurance policy will offer protection for furniture, clothing, home appliances and high value items, such as electronics.
Homeowners who are found liable for accidents that occur are fully protected through their insurance plans. This applies regardless of where the accident occurs. Liability protection continues to be valid even if the incident occurs away from the premises.
Tenant Property Protection
A homeowners’ insurance plan will not cover the personal property of a tenant residing in the property. The tenant must take out a separate insurance plan. The experts recommend tenants take out a renters’ insurance plan to account for their belongings.
What Does Landlord Insurance Cover?
Landlord insurance has a host of similarities with homeowners’ insurance. There are some areas, however, where homeowners’ insurance will not sufficiently account for the needs of tenants.
The big difference between the two is landlords are not obligated to live in the same property as the tenant under these policies. Landlord insurance continues to provide protection for landlords who live in separate accommodations away from their rental properties.
Protection From Disasters
Landlords are fully protected from disasters through a landlord insurance plan. The common misconception that homeowners’ insurance and landlord insurance are interchangeable stems from the type of disaster protection offered by both. Each insurance type offers the same type of protection from fire, wind, flooding and other types of disaster.
Personal property is not covered through a landlord insurance plan. Instead, landlord insurance will cover only items used by the landlord to maintain the property, or items a tenant uses to maintain the property. For example, if a landlord provides the tenant with a snowblower or a lawnmower, this will be covered under landlord insurance if they are damaged or destroyed.
The type of liability protection within a landlord insurance package is almost identical to homeowners’ insurance. Any accidents the landlord is found liable for will be covered by their insurance plan. This will include legal fees, settlements and medical costs.
Tenant Property Protection
Tenant property is not covered under landlord insurance. This means in the event of a fire or other disaster tenants will have to rely on their personal insurance policies to secure a payout for any losses. Instead, tenants are advised to take out renters’ insurance. This sort of insurance is similar to a homeowner taking out homeowners’ insurance for themselves.
Which Policy Do I Need?
It may seem apparent that there is little difference in the coverage offered by each type of policy. With some exceptions, landlords can avail of the same level of coverage regardless of the plan they settle on.
Landlords, however, should always opt for landlord insurance. The crucial difference between the two is homeowners’ insurance only applies if the landlord resides in the same property as the tenant.
This makes conventional homeowners’ insurance unsuitable for landlords with multiple properties or landlords who do not share their homes with their tenants. Landlord insurance is also geared towards the needs of landlords, therefore additional add-ons are available through these policies.
Homeowners’ insurance does not account for the unique needs of landlords and their businesses. Not having the proper protection increases business risk should an incident occur on the landlord’s rental property.
Speak To An Experienced Personal Insurance Agency On Landlord Insurance Vs Homeowners Insurance
It is clear that homeowners’ insurance is unsuitable for the vast majority of landlords. Many landlords will find that it fails to offer a sufficient level of protection for both themselves and their tenants.
Begin browsing different landlord insurance policies by connecting with the experienced insurers at Merchant Family Agency. This professional personal insurance agency can provide tailored advice on the best type of policy. Get in touch for a free consultation and a quote with Merchant Family Agency.