Sub lease insurance
Pete SanchezPro Member
Member since 2025 · 3 posts · 0 votesSub lease insurance
Most Popular Reply
Specialist · Strongsville, OH · Member since 2016 · 303 posts · 217 votes
1wThis is very MESSY. If the owner switches from a landlord policy to a short term rental policy AND names you as additional insured you maybe.. kinda... sort of have coverage.
But... If the owner's landlord policy finds out the property is arbitraged they very likely could cancel the policy or deny claims if what is going on breaks any of the conditions or exclusions of the landlord policy.
There are a lot of buts... here is another one
A loss occurs damaging the furnishings - the insurance carrier will pay out the property owner (and the property owner will have to say it's his stuff) and you will have to collect from the property owner for your damaged stuff.
If the owner tells the insurance adjuster that it's your stuff the STR policy won't pay as it's "tenants property".
To cover tenants property you'll also need a renters policy - but your renters policy could be full of exclusions about covering property that is not at your residence and that you've rented that property out for the use of others.
While the house is being repaired you won't be able to rent it out so... does your contract allow you to stop paying rent to the owner?
However the insurance policy could reimburse for loss of rent but that would only pay to the landlord and not you for your loss of your short term rental income.
Have I talked you out of this yet?
Rod above says he has a product for this and if so - that is awesome I have not seen that yet.
4 Replies
- 1wRod HanksBusiness MemberInsurance Agent · Dallas, TX · Member since 2013 · 743 posts · 462 votes
@Pete Sanchez Hi Pete most insurance policies don't allow it as you are finding out. However we do have a product that does allow it. Reach out if I can help.
Rod Hanks Insurance4.9152 Reviews - Specialist · Strongsville, OH · Member since 2016 · 303 posts · 217 votes1w
This is very MESSY. If the owner switches from a landlord policy to a short term rental policy AND names you as additional insured you maybe.. kinda... sort of have coverage.
But... If the owner's landlord policy finds out the property is arbitraged they very likely could cancel the policy or deny claims if what is going on breaks any of the conditions or exclusions of the landlord policy.
There are a lot of buts... here is another one
A loss occurs damaging the furnishings - the insurance carrier will pay out the property owner (and the property owner will have to say it's his stuff) and you will have to collect from the property owner for your damaged stuff.
If the owner tells the insurance adjuster that it's your stuff the STR policy won't pay as it's "tenants property".
To cover tenants property you'll also need a renters policy - but your renters policy could be full of exclusions about covering property that is not at your residence and that you've rented that property out for the use of others.
While the house is being repaired you won't be able to rent it out so... does your contract allow you to stop paying rent to the owner?
However the insurance policy could reimburse for loss of rent but that would only pay to the landlord and not you for your loss of your short term rental income.
Have I talked you out of this yet?
Rod above says he has a product for this and if so - that is awesome I have not seen that yet.
- Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes6d
As long as you and the property have no equity and no or very little net worth you’ll be ok. Not because insurance will help,at all. But they’ll try to sue you. The insurance company will say not our problem. And then they’ll see you two don’t have enough to make it worth the lawyers time.
If the owner has any equity/net worth he should back out. If you do, you should back out. You’re basically going to pay for insurance that isn’t going to cover a big loss if any. PLEASE don’t let anyone get hurt or the property get even partially destroyed by weather/fire/etc. The owner isn’t doing what they told the insurance company they were doing and you can’t insure the property you don’t own for damage. Lastly, no incident will occur where you don’t both get sued personally. It will be cheaper for the insurance company to deny coverage than pay out anything over a few thousand dollars.
- 6dHamza IbrahimPro MemberReal Estate Consultant · Wylie, TX · Member since 2026 · 9 posts · 5 votes
This is the exact deal structure I have run for years, and the insurance question is really a paperwork question. Two things that keep it clean.
First, keep the lease and the option as two separate documents. One agreement that tries to be both a lease and a purchase contract muddies who insures what and gives every carrier an excuse to deny. The lease governs the tenancy, the option governs the future purchase, and each names who carries which policy.
Second, put the insurance obligations in the lease itself. Seller keeps their landlord policy and notifies their carrier in writing that the property will be tenant-occupied. You carry a renter's policy for your contents and liability, plus whatever the arbitrage operation needs. Get the seller's acknowledgment in writing before you spend a dollar on the place.
And have a local real estate attorney review the package before you sign. Lease-options stack two layers of risk, the tenancy and the future purchase, and the review costs a fraction of what one uncovered claim costs.
Join the conversationCreate a free account to reply, vote on answers and follow this thread.