Renter's Insurance And Vacation Properties
If you own or are thinking about owning a rental property
, you're probably already aware of the ever-present possibility of litigation from your renters. We live in an increasingly litigious society. If you want peace of mind as a property owner, you're going to need solid renter's insurance coverage.In addition to protecting you from lawsuits, renter's insurance also protects your property itself.
You might think renter's insurance wouldn't differ too greatly from traditional homeowner coverage, but there are several significant differences. Vacation properties are likely to be located in a locale with its own specific weather or environmental hazards, such as a mountain cabin or waterfront home. These conditions often warrant custom insurance coverage.
In addition, a rental property is likely to only be occupied for only a portion of the year which is a totally different situation than that of a traditional homeowner. On top of everything else, renters are not likely to show the same care with your property as they would with their own; this is important to keep in mind when selecting a renter's insurance policy.
Let's take a look at some of the basic kinds of renter's insurance coverage:
Personal Property
This coverage insures the actual structure itself as well as any personal belongings in the structure. This includes things such as the furniture, appliances, and other items you might provide for your guests. When it comes to your guests' personal property, you usually won't have to worry; it should still be covered under their own homeowner's insurance policy.
Perils
Your personal property insurance might offer protection against some potential perils, such as fire and flood. However, it's unlikely that a basic policy will automatically include protection against any and all perils that your property may face, such as things like vandalism, lightning, earthquakes, theft, and windstorm damage. You'll want to determine what kind of protection is initially included in your coverage, and then supplement it with special policies to cover the specific perils that could befall your property.
Liability
This one can be very important. As we mentioned earlier, we live in very litigious times. If a renter has an accident on your property, and this could include anything from a simple slip to a serious fall, can lead to a massive lawsuit. Liability insurance pays out for cover medical costs or other damages stemming from an accident suffered by renters on your property, and can also protect you against potential lawsuits.
Business Interruption
Business interruption insurance is designed to cover your lost rental income in the event that your business becomes temporarily inoperable. Keep in mind, this kind of insurance won't pay to cover lost income due to the property simply not being rented for a period. Rather, it covers the loss of income that might result from your property being temporarily unusable due to an accident. For example, if your beach house is damaged by a hurricane, business interruption insurance could cover the rental income lost during the time it takes to repair the house.
As a Renter
On the flipside of the renter's insurance coin, there are also policies available for times when you yourself are a renter. Of course, as a renter, you wouldn't be held accountable for things like weather-related damage to the property that you're renting but you could find yourself in other tough situations. In many cases, if you've somehow caused damage to a property that you're renting, whether through a simple accident or due to negligence, you may be expected to cover the cost of the damages yourself.
While your own homeowner's insurance policy might cover some of the costs, it's important to understand the degree that you could be held liable. Of course, this kind of insurance isn't always a necessity. Before staying at a rental property, you might want to review the likelihood of incurring any potential costs during your stay. Do you have a large family with several young children who might be likely to break something in the home? If so, you might want to consider this kind of insurance.
But at the end of the day, the most important kind of renter's insurance deals with your own vacation properties. If you're not properly covered, not only could the revenue from your vacation property be cut off, you can find quickly find yourself buried in debt. So before that first renter arrives, make sure you've purchased the kind of policy you might need.
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