Insurance for Rental home

[Bil Casimir]

I am about to purchase a town home to rent out. This will be my first property that I have ever rented. I am wondering do I carry the same type of insurance as I do for my home? What about home warranty insurance, is it worth it?

Thanks for your help,
Bill

[Steve Babiak]

You will be getting a dwelling policy (DP-1, DP-2, DP-s, etc.) rather than a homeowners policy (HO-1, HO-2, Ho-3, etc.). The number usually identifies something about perils the policy covers. Try to get a policy that covers all perils with few as possible exclusions ("open perils"); this will typically be a DP-3. And don't forget to get into ACV vs RCV and "loss of rents" coverage.

As for the home warranty, as you mentioned this is a sort of insurance. This is something that most landlords "self insure" for, and keep sufficient reserves so that when an event hits there is enough in the reserve funds to "pay the claim", i.e. cover the repair. Save the premiums you would pay for this and put them into your reserves. Now, there are those who do things like lease options who advocate in favor of these warranties, but those who favor this are looking to not have any involvement with the property so the tenant/buyer can just call on the warranty company for service; as a landlord, retaining ownership for a long term, you have more at stake and you will have more involvement.