When it comes time to insure a guest house, there are many factors to consider. Landlord insurance is different from homeowners insurance. Insurers assess risk based on the assumption that those who own the home they are living in will take good care of it. However, renters are not as inclined to tend to a home that they are not financially invested in. To cover the added risk, landlords pay the extra expense. Typically, landlord policies cost more than a standard homeowners policy. However, it will cover loss resulting from wind, fire, ice, and theft.
Dwelling Protection
Landlord policies are commonly called “dwelling protection,” which can be purchased in a range of coverage. You can secure an insurance policy that protects the cash value of the loss, or get a broader protection plan covering replacement value, which is generally a better deal. These dwelling policies also cover your furniture and appliances, other property structures and may provide liability protection and rental income loss while repairs are completed. The basic level of coverage, a DP-1 policy, covers “named perils,” such as fire and vandalism. A DP-2 coverage will extend to named perils like weather and collision damage if a car hits your house. A DP-3 policy will protect you from anything that is not excluded, which are typically just incidents as acts of war.
Added Insurance
You can opt to purchase additional coverages such as lost-income coverage if your policy doesn’t include it or a protective landlord policy to cover repairs such as if your air-conditioning was to break down. A standard dwelling policy may not be enough for a severe incident. Consider an umbrella policy for a broader range of liability coverage, and keep in mind that this still won’t cover your renter’s possessions. They will need renters insurance.
Homeowners Insurance
Is the space that you rent out part of your primary residence? How long will you be renting out the space? These are just a couple of factors that may or may not trigger an increase in your homeowner’s insurance, which is why you must speak with your insurance agent to discuss how you can adequately protect your unique situation. There are riders such as “unit rented to others” that can be added to your current policy, or if you usually reside in the house that you are renting a room from, then your homeowner’s insurance will apply. If the house is just being lived in by the renter, a landlord’s policy is probably needed. Renting out space from your home can be a great income source, but it doesn’t come without risk exposure. Your insurance needs will depend on:
- The size of the rented space
- Where you live
- When you rent out your home
Gray Areas
Those who own relatively spacious vacation homes will often rent a portion of the home during the prime season while occupying one or two rooms. In this case, they will probably purchase homeowners insurance with a “unit rented to others” rider that will have a small rate increase due to the fact that it is considered a secondary residence. You may be betting on your income from seasonal renters. However, if renters are occupying the majority of the house for a whole season, homeowners insurance with a rider may not be adequate. Speak with your agent to clearly understand your situation and current coverage needs. Also, note that a homeowners insurance and tenant rider will only cover your own losses, not the renter’s. It is important that guests understand this so they can protect themselves as well with renter’s insurance.
About Sine Insurance
At Sine Insurance Group, we are dedicated to providing you with custom-tailored insurance policies to protect your assets. Our comprehensive packages have been expertly crafted to serve St. Louis and the surrounding areas for the past 25 years. For more information about our products, contact us today at (855) 700-0889.