There are plenty of reasons why renting a home might be a thrilling chapter of your life—whether you are moving to your first apartment, stepping up to a bigger apartment, or shifting to another place because of your work. Usually, we overlook many things when planning, packing, and doing paperwork, and one of them is the most important question: Who pays home insurance on a rented home?
It is an interesting and very important question as well.
The answer is that both parties have insurance responsibilities, but they are different as one is a landlord, and the other is a tenant. A landlord usually has building insurance, whereas a renter should definitely look into renter’s insurance (some are called tenant insurance). But to know exactly who pays for what and every reason behind that, let’s discuss this.
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Who Pays Home Insurance When Renting?
When renting is the subject, all lease agreements about different things can be negotiated, even in the lease, such as whether you are required to pay for utilities, trash collection, water, or internet use. However, when we are discussing insurance, it is not so easy. In most instances, the landlord must insure the property, not the tenant. But to fully understand the reason, go and get the difference between homeowners insurance and landlord insurance—yes, they are different things.
What are the different features of homeowners’ insurance and landlord insurance policies?
If you’ve been thinking about buying a house, it’s likely that you have come across or even inquired about homeowner’s insurance, which is exactly what we are talking about. This kind of policy is suitable for the property the owner lives in. It pays for the building, the landlord’s personal stuff, and, typically, it covers liabilities.
But when you decide to rent a property, it’s a different story. Changing into a landlord means starting to play a part in the property’s management. The person is not only a homeowner but also a business operator. The role of insurance here is that of a landlord.
Landlord insurance functions to keep those properties up for rent. Besides taking care of the structure of the property, which is the aim of a homeowners policy, it also has additional features like:
- Loss of…Revenue if property becomes uninhabitable by cause of a covered peril like a fire or water damage.
- Liability protection if a guest or tenant encounters an injury due to, let us say, a broken stair
- Legal assistance and compensation for the landlord in case property-related issues litigate him/her
Your insurance policy should cover the risks arising from tenants in the property instead of the owner. A normal homeowner’s policy will not be sufficient, as it generally will not cover damages that occur while a tenant is in the space. Therefore, if you are a landlord who rents out space, you will have to take the path of landlord insurance to ensure you are fully covered.
Umbrella Insurance: Extra Protection for Landlords
Some landlords buy umbrella insurance for extra coverage. It protects beyond the limits of a landlord policy. This is useful if large claims arise from lawsuits or major disasters.
Umbrella policies offer protection against defamation lawsuits. Not every landlord needs this coverage, but landlords of multiple properties may find it helpful.
Does a Renter Need Insurance, Too? Absolutely.
Renter’s insurance covers your belongings and personal liability. You are not responsible for the building, but you are responsible for your own stuff.
Renter’s policies protect clothes, electronics, and furniture inside the apartment. They also cover theft outside the home, such as a laptop stolen from a car.
If there is a fire or a flood, your renter’s insurance will pay for you to stay somewhere else. This makes it much easier to deal with the damage and stress of the situation.
Liability Coverage: One of the Most Overlooked Benefits
Liability coverage is vital for renters but is often ignored. If a guest falls and gets hurt, you could face big bills. Renter’s insurance covers these costs, safeguarding your finances against accidents.
Your belongings are not the only thing at risk; you could also face severe financial consequences from accidents.
Why You Need to Think About This
Therefore, while it may appear that insurance is just a supplementary requirement when renting, in fact, it is a very important requirement that is responsible for the safety and security of both the property owner and the tenant.
- The landlord’s insurance applies to his property and his liability.
- The renter’s insurance pays for your property and your liability.
Although landlords are legally obligated (and have a significant interest) to take property insurance, renter’s insurance is usually optional, yet this doesn’t mean it is not a must-have.
For only a few dollars a month, you can secure the protection of thousands of dollars in personal belongings. Thus, it’ll be a great relief to know that if any unexpected incident happens, you can be assured of being safe without feeling the financial burden. Moreover, the low cost and high benefit of renter’s insurance as a tenant make it one of the wisest decisions you can make as a renter.
