Understanding Insurance and Renting Out Your Home

No matter what your reason for renting out your home, there are a few insurance tips that you need to understand before you begin on the process. Renting Our Your Home, TJ Woods Insurance, Worcester, MAWhether you are renting out a summer home during the winter, leasing out a room to help pay the mortgage, or have become an accidental landlord, it is important to understand how your insurance works when renting to a tenant. Otherwise, you could be stuck with paying for costly damages out of pocket.

The following excerpt from The Nest explains how your tenant is insured.

Your homeowners policy probably won’t pay for serious repairs if you’ve rented your home. Your insurance company probably issued your homeowners policy on the assumption that you’d be living there. Review your policy or call the company to make sure. It’s better to know ahead of time that you need to change coverage, instead of finding out later when you make a claim and the company denies it.

In fact, since the homeowners policy is probably not acceptable coverage for when you are renting out your home, not changing your policy type is essentially like having no insurance at all.

Of course, one way to cover the cost of repairs can be through the tenant’s security deposit. Landlords typically request the cost of one month’s rent in the form on a security deposit. Should the lessee not cause any damages that require repair, then they will receive the money back at the end of their lease. Otherwise, the money can go towards the cost of any damages. This acts as a great incentive for them to take care of your home.

However, sometimes accidents happen and there is nothing that you and the tenant can do to prevent this. Disasters typically can’t be covered by the price of the security deposit. If a tree falls on your home, you will want someone else to cover the costs of the repair.

Oftentimes, insuring a piece of rental property is actually cheaper than your personal homeowners insurance policy, since it does not cover the belongings that are inside the house. However, if you are still wary of the cost of changing your policy, this excerpt from MSN describes the tax credits that you can get from renting out your home.

When you file your tax return, you’ll generally report rental income and expenses on Schedule E. You’ll be able to deduct your mortgage interest on the rental property, as well as insurance premiums, real estate taxes, advertising costs to rent the house, rental management fees, utilities you pay, travel to and from the property and legal and accounting costs.

Landlord insurance does not cover the tenant’s belongings, however. Encourage them to obtain renters insurance so that they are also protected should something catastrophic occur.

If you are still unsure whether or not your homeowners policy covers your tenant, please contact the agents at TJ Woods Insurance. We’d be happy to help you find the right coverage for you when you are renting out your home.

What made you choose to rent out your home? We’d love you to post your answer in the comment section below.