USA Today reports Americans take approximately 2.5 annual vacations. If you have a rental property, then you need to familiarize yourself with vacation rental insurance coverage, especially if your property is quickly filling up for upcoming vacations.
Coverage for rentals safeguards your property in multiple ways, including property damage, theft, and more. Owning a second home may be a great source of income, so you need to protect it the same way you'd protect your primary residence, and this article explains why.
Do You Need Vacation Rental Insurance Coverage?
Yes, because vacation home insurance protects landlords when tenants occupy their homes. More often than not, any damage is excluded from homeowners insurance because renting your home for profit is considered a business transaction.
The exception might be if you only rent to friends and family - free of charge. Your insurance company would clarify what is/isn't covered by homeowners. They'll also advise you on when to purchase a separate landlord insurance policy.
Vacation rental insurance also kicks in should you rent out a condo and something not covered by HOA sustains damage. Typically, HOAs cover the building's exterior and grounds. This usually includes:
- Exterior walls
- Roof
- Siding
Owners are responsible for anything "walls in," so familiarize yourself before renting out your condo.
What About Umbrella Policies?
Umbrella policies typically don't apply to anything considered business-related. Since money exchanges hands between landlords and tenants when renting your home for vacation, insurance coverage for rentals is a necessity, as umbrella policies won't apply to any damage sustained.
Types of Property Protection Insurance
There are several types of policies designed to protect landlords and their property, covering structural damage, liability from injuries, loss of rental income, and more.
Loss of rental income applies when a rental property needs repairs and landlords are unable to rent it. Liability from injuries is essential should a tenant sustain any type of injury on your property. Additionally, if your property experiences any type of damage, insurance works to protect the home itself.
Keep in mind that rental insurance is typically tiered, with each tier encompassing a different level of coverage. Some policies are more affordable than others, but it's better to be overinsured than underinsured. Review your coverage frequently to ensure you have the appropriate rental insurance policy in place for your property.
The majority of policies exclude flood and earthquake damage, as they're considered extra. Conduct a risk assessment to determine what plan you need and whether you should carry flood insurance from FEMA.
Do You Have Enough Property Protection Insurance?
Vacation rental insurance coverage is essential for all landlords. Even if tenants are only using their rental property for holidays, this insurance still protects landlords from unexpected events, especially if their property needs repairs and they're unable to rent it, losing income. Since policies are tiered, landlords need to determine their exact insurance needs and select the best plan.
PMI Greater Nashville is devoted to helping landlords manage their property. We offer a free rental analysis so you know exactly what your rental is worth. You can also call us at 615.784.9016.
