First time Mom and Pop landlords commonly overlook the importance of changing insurance policies before renting their homes to tenants. What protected you as a homeowner will not protect you as a landlord. Failing to change your insurance could result in costly damages.

Patty Lang, an Associate Broker/Property Manager for Ambrose & Shoemaker Rental & Property Management Services in Corning, NY, says that she was “totally unprepared to find that many owners were renting their homes without making any insurance changes. Many people are unaware of the need for tenant insurance. As a result, we have always spent a great deal of time explaining the importance of this coverage to new tenants. What we have now become aware of is the many property owners believe that their existing homeowner policy will continue to provide sufficient coverage.”

Guess what? It doesn’t.

“The moment that the home is occupied by a tenant, the homeowner takes on the role of landlord,” Patty explains, “therefore the insurance coverage must be changed from a homeowner policy to a landlord policy.”

A homeowner policy basically covers a homeowner for:

• damages to the structure;
• damages to personal property; and,
• liability coverage to protect the homeowner in lawsuits alleging neglect of some sort.

A landlord policy also protects the landlord from structural/personal property damage and liability, but takes into account that the property is not owner occupied. Even if you’re only renting your home out for a few years, it is still a good idea to invest in a good landlord policy. This will protect you in the event of a fire, bad storm, burglary or vandalism.

A landlord policy takes care of one side of the rental relationship, but it makes no provisions for coverage of the tenant’s personal property. It is important, therefore, that tenants invest in a tenant’s (renter’s) insurance policy. If they do, they will have some compensation for their belongings in the event of a burglary or natural disaster.

In order to be completely covered, you need to find an insurance agency that will provide a policy which fits your specific situation.

“For example,” Patty explains, “a property owner decides to rent out his house during the three years he will be working abroad. There is a wood stove in the house, and the owner insists that if a tenant wants to use the wood stove, he must have tenant insurance with a rider carrying specific coverage for wood stove use.

“This owner still believes that his own property insurance provides coverage of his property even after it becomes a rental. Quite accidentally, the owner learns that his policy must be changed to cover him as a landlord. In making the change, he finds out that his particular insurance agency will not cover damage cause by tenant use of a woodstove, in their landlord policies."

So, not only should the owner and tenant have landlord and tenant insurance policies, but they must also be sure these policies are sufficient for their individual needs. In the previous case, the landlord would need to find an agency willing to provide him with proper coverage.

In any case, landlords and tenants must carry appropriate policies which include riders for uses not covered in the basic homeowner’s policy.

Published: March 10, 2000

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