Is renter's insurance worth it?

Ultimately, rent guarantee insurance can be useful, but it is an expense that some landlords can avoid by carefully selecting tenants. Still, those who need that peace of mind may want to go ahead with it despite the cost. Buying renters' guarantee insurance, like buying any other type of insurance, is about protecting your property and your investments. Any situation where you are unable to collect rent becomes very stressful, so having insurance to reduce that burden can be a very smart move.

This insurance covers the property you own in the rental property, such as the washer and dryer, or window coverings. If you rent your home furnished, you will need to insure all the furniture as well. Again, policies differ widely with this type of coverage. Check whether your property is insured for its full replacement cost or just its depreciated value.

When buying insurance for your rental property, be sure to take out the most comprehensive policy you can. According to the State Farm Rental Home Insurance website, "State Farm's rental home policy covers direct and accidental physical loss to your rental home and your personal property located therein, based on the coverage provided by your policy". Rental dwelling insurance costs depend on the type of property being insured (home, condo, multi-family, long-term or Airbnb), as well as the location, down to a specific address. Before committing to a short-term rental, you should contact your insurer to make sure you are notified and understand your coverage.

We have been able to confirm that landlords can insure up to 10 rentals with a single policy and obtain coverage for both the property itself, loss of covered rental income and personal liability. With such large potential liabilities resulting from damage to rental properties, it is critical that landlords purchase adequate coverage for their investment property, even if their tenants have separate renters insurance. Although USAA offers renters insurance to owners who qualify for membership, there are very few details about their coverage that are publicly available. Most will offer some form of rental income loss coverage, either standard or as an add-on to their policy.

State Farm does not cover loss of rentals due to things like local government bans on using the property for short-term rental. The insurance you have on your rental property could make a difference in your success as a landlord when the unexpected happens. Since it can take months for a landlord to be able to evict a tenant for non-payment, clean up the property and sell it to a new tenant, the insurance company takes over what the tenant has failed to pay. Like private mortgage insurance (PMI), renters' guarantee insurance offers protection to the landlord, rather than the tenant.

If it does not come as standard, you can purchase an endorsement from your insurer that extends your coverage to temporary rentals. Insurers also take into account factors such as whether the property is in a flood zone, whether the landlord has made any recent claims, and even the insurer's interest in insuring a property in a particular area. But did you remember to talk to your insurance agent? Insurance providers consider a rented property to be a different risk than an owner-occupied property.

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