Homeowner vs Landlord insurance?

Question

Not sure if anyone work in an insurance company or have experience making claims on insurance.  I currently own a 2 family house which started as owner occupied insurance coverage (HO-3) but I moved out of the house and made it into a rental property.  My question is whether I can keep my homeowner insurance (HO-3) or shall i upgrade into a Landlord insurance (DP-3)?  I have heard different stories about the coverage if something happened.  Someone told me this is kind of like a grey area in insurance.  Basically, the insurance rarely attempt to find out/prove if you are owner occupied, and the insurance is obligated to cover the damages, etc.   Anyone has any thoughts? Anyone has ever claim the homeowner insurance with the whole house renting out to tenants?

Tim Crumley · Answer

Homeowners insurance covers the contents ie TVs, Furniture, Clothes etc. as well as the structure.

Landlord covers the structures only.  The tenants should get renters insurance to cover their belongings.

You need landlord only as there is no need to cover contents that aren't yours.

Kyle Hipp · Answer

it usually costs less to go to a landlord policy. You drop the large personally property insurance and add loss rents into it and it is usually cheaper for me....

James Wise · Answer

If you do not live there change it to a landlord policy.

Is it worth it to risk a claim not being paid out to try to save a small amount of money every month?

William Allen · Answer

Yes, it is different. Not sure if you found the answer yet but your liability coverage is likely lower too.

Derek Lacy · Answer

Quick answer, as long as you did not commit fraud or misrepresent facts to the agent or insurer (like write an e-mail stating "I need to know the cost for the home I live in at 123 Any St" when you don't live there).  You could expect property coverage, but a cancellation forthcoming.

BUT.  Please go to

http://www.iii.org/sites/default/files/docs/pdf/HO3_sample.pdf

That is the standard HO3 policy.

Go to page 17.  This is a liability exclusion.  Check out "Business".  Liability is excluded if you are not occasionally renting the home.  In other words, if it is always a rental.  You have no liability coverage.

I see this all of the time in insurance, people are extremely concerned about full coverage on a $10,000 auto, but they will only carry $100,000 in liability when they are worth $600,000.  They would risk losing $500,000 to save money on a plan, but opt to cover the $10,000 car...

So same thing here, you save $400, but you risk no coverage for that slip and fall that the tenants friend just had at the place.

Remember this is standard language, I have seen two of the name brands put forward an endorsement to standard language stating that the policy is conditional upon owner occupancy.

Eric Li · Answer

I appreciate everyone for your advice.  I guess i will get the DP-3 policy because it is only $400 over the HO-3 policy.  ($1400 vs $1000)  This way i can play it safe and have a peace of mind....

P.S> i am not sure why its more expensive but i guess it is based on location; New York City tenants might be more risky in the insurance company's eye....

Steve Babiak · Answer

Get the DP-3. You might want to have a discussion with your agent regarding other riders that might be worth considering.

Tim Crumley · Answer

Oh and as an insurance adjuster part of my job it to report if the home is not owner occupied and is covered under a homeowner's policy.  This report goes to underwriting.  I am not sure if they drop people for this or if it is for customer service to contact the customer to try and save them money but I imagine that it's the former.  Play it safe and go landlord but make sure that you get an RCV, Replacement Cost Value, policy.  I see a lot of landlords that aren't and they are surprised at settlement.

Homeowner vs Landlord insurance?

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