If you have a rental property, and even if you simply rent out your property to paying guests from time to time, it’s important to check with your insurance company to make sure you are covered in case of damage or any claims being filed. As this article points out, your homeowners insurance may not be sufficient to cover paying guests.
And, when selling a property, it’s important to note that many homeowner policies are void if the property has been vacant for more than 30 days.
Thanks to Casey Camens for the following post:
Recent retirees Bill and Charlotte invested in a lakefront cabin, which they rented out for extra income. They rented to some wonderful people—until a group of recent college grads wreaked havoc during their week-long celebration, leaving the place with extensive damage. Unfortunately, Bill and Char never mentioned to their insurance agent they planned to rent out the cabin, and their homeowners insurance didn’t cover damage done by paying guests. They were forced pay the repair bills with their savings.
Rental properties can be wonderful opportunities to earn extra cash after retirement, and many people borrow from a bank or sell their annuity payments to fund such a venture. There are important insurance issues you should address upfront, however. Don’t wait until you suffer a loss to find out if you have the right type and amount of insurance.
Speak with your insurance agent before advertising your home as a vacation rental. Tell the agent how often you plan to rent it to others and how much time you plan to spend there yourself. Ask the representative what your existing policy covers and what additional coverage is available to fully protect yourself and your asset.
Make sure you have damage and liability coverage while guests are in residence. Online resources such as the National Association of Insurance Commissioners offer comprehensive property insurance information.
Opt Into Insurance Add-ons
Depending on the scope of your existing homeowners policy, you may wish to make some adjustments that protect you more fully as a landlord. Liability coverage is one important upgrade to consider. If renters hurt themselves while staying in your home, they could sue you for a substantial sum. Paying to raise the dollar limit on your liability coverage is often well worth it.
Adding extra insurance to pay for replacement of furnishings and other possessions renters could damage is also a good strategy. Even if you already have an umbrella policy that extends to your second home, the NAIC suggests you verify that your existing liability coverage is sufficient for your needs and find out whether any exclusions might apply to your rental property.
Even if paying guests do damage your property, full insurance coverage helps you continue to enjoy the benefits of your investment without suffering a personal financial loss. Your retirement income is at stake, so protect that investment by making certain your vacation home is fully covered against losses.
Casey is a self-employed freelancer who blogs about anything from insurance and accounting to green tips and marketing trends.