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You absolutely have insurance issues to consider when renting out your home. As you might have guessed, rental property owners have some unique insurance needs. A standard homeowners policy isn't appropriate for rental property, because:
(1) you don't need to insure the contents of the house, unless you provide furnished accommodations;
(2) you need to be more concerned about liability issues; and
(3) you need to protect yourself against the loss of rental income. Your tenants may purchase renters insurance, but even if they do, it won't provide any coverage for you as the owner of the property.
Fortunately, there's a policy designed especially to meet the needs of rental property owners. Most insurers who deal in commercial insurance can sell you a policy specifically for rental property. However, there are many variations among rental property policies. Some provide replacement cost coverage, while others only insure property on an actual cash value basis. Some policies only provide coverage for one or two named perils (such as fire), while others provide much broader coverage. Because of these variations, you may have to shop around to find a policy that provides complete coverage. A good rental property policy should provide the following:
- Broad coverage for the physical structure of the house, on a named-peril or open-peril basis
- Coverage for other structures located on the property (garages, sheds, etc.)--this
coverage is often limited to 10 percent of the coverage for the house
- Coverage for your property left on the premises (appliances, maintenance equipment, etc.)
- Coverage for loss of use, if you lose rental income as a result of a covered peril
- Liability coverage for injuries or property damage that occur on the insured property
- Medical payments coverage, for medical expenses that arise from injuries to others on the insured property
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