Rental properties normally do not qualify for a homeowner's policy because they are not owner occupied and the insurance company assumes a greater risk when they can not underwrite the person or persons living in the house. Most insurance companies realize that insurance coverage is still required though, especially if there is a mortgage, and offer a dwelling fire policy for tenant occupied or vacant dwellings.
Property And Liability Coverages
Owner's of a rental property purchase dwelling fire insurance to protect the physical dwelling and any outbuildings or other structures located on the property. Dwelling fire insurance also may include liability coverage to protect the owner should someone become hurt on his property and he is found negligent. If the owner has a mortgage on his property through a bank or other lending instituite, they will require the owner to carry dwelling fire insurance to protect their interest until the loan is paid off.
Fair Rental Value Coverage
If the property is rented to a tenant and becomes uninhabitable due to a covered loss, the fair rental value coverage will reimburse the insured for any loss of rent he sustains. This is especially important if the insured relies on rent money to pay the mortgage.
Perils Insured Against
Dwelling fire insurance offers three types of coverages: basic, broad and special. Each type of coverage insures against different perils. As the title implies, basic dwelling fire insurance provides coverage for basic perils, including fire or lightning, storm damage and vandalism. Broad dwelling fire coverage includes the perils listed in the basic policy as well as burglary, collapse, accidental discharge of water and freezing. Dwellings written on a special coverage form covers every imaginable peril unless it is specifically excluded in the policy.
Renters Insurance
Landlords often require tenants to purchase renters insurance, which provides protection for the tenant's personal property as well as liability coverage. Liability coverage will pay for damages sustain if the tenant accidentally leaves the stove or iron on, and burns down the house.
Considerations
To ensure a rental property and its contents are properly covered, the owner should purchase a dwelling fire insurance policy and the tenant should purchase a renters policy. A dwelling fire policy will not provide any coverage for the tenant's personal property nor for the liability, and a renters policy will not provide any coverage for damage to the dwelling, unless the tenant is found liable for said damages.
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