What You Need to Know About Landlord Ins, When Owning a Luxury Home

The majority of individuals owning a luxury home might not think about landlord insurance in the initial process of bringing on a tenant but you might find out that you are an accidental landlord. This refers to people who never intended to be landlords but possibly purchased a new luxury home and weren’t able to sell their old one. This leads to them renting out the old home.

Some of those individuals may have bought a vacation home but find that they need short term tenants to cover expenses that are higher than they thought.

If you are an accidental landlord or simply new to the luxury home market of rentals you do need to consider landlord’s insurance. This is true even if you are only taking in renters a few weeks a year. Your homeowner’s policy will typically provide coverage if you’re only renting out the house a few weeks of the year but if the rentals become more than occasional your homeowner’s policy is simply not enough.

When you live in the same home that your tenant does you can endorse the homeowner’s policy with a unit rented to others. Policy protection for that particular situation but if you live in a separate home where you own a second home where you regularly rent out you need to obtain a second policy.

Policies for rental units will have various names depending on the actual company providing it. They are typically provided into three categories DP1, DP2 and DP3. A DP1 policy is basic and covers general things like vandalism and fire. A DP2 policy has a broader range of coverage by providing protection for perils like windstorm, hail, fire or vandalism. A DP3 policy is known as an open peril policy meaning that unless a peril specifically excluded it will be covered by the policy.

The majority of insurance brokers would recommend that a landlord opts for a DP3 policy. While a DP1 policy only gives you actual cash value on the house a DP3 will give you replacement costs. This is also an opportunity to consider the potential for loss of rental income in your coverage such as if the building has to be emptied so that you can take care of repairs. You should also consider sufficient liability coverage on the rental so that you have protection from your personal assets if someone sues you for an accident that happens on the property.

Whether you’re buying or selling luxury homes  if you become an accidental landlord you should considered of landlord’s insurance.