When you decide to rent out your home, you might be a bit confused as to what type of insurance you need. But one thing is certain: landlord insurance needs to be on the list.
If you plan on renting out your home or have investment properties you need insured, insurance specifically for landlords is a priority. It covers you for liability in case of property damage or injury claims for something like a tenant slipping and falling on a wet sidewalk, and some policies will even cover your lost rental income in case your property is uninhabitable and needs to be repaired. Keep in mind that this type of insurance is generally for non-commercial properties only.
There are three types of coverage when purchasing landlord insurance: DP-1, DP-2, and DP-3, usually referred to as dwelling policies. DP-1 is the most basic coverage of all; it covers disasters like fire, vandalism, wind, hail and other typical events that may cause damage to your property. A DP-2 policy is a bit more comprehensive, as it will also cover perils specifically named in the policy like windstorms in the Midwest or hurricanes in Florida.
A DP-3 policy is the most comprehensive one of all. Referred to as an “open peril” or “special form” policy, these policies cover not only what the first two policies cover, but will also pay for any event or damage that isn’t specifically excluded from the policy. Many will even cover collision damage if someone’s foot slips off the brake and a car ends up in your property’s living room. The biggest difference is that it covers replacement cost, not just the cash value; if a garage is ten years old, its cash value would be much less than the replacement value. The coverage applies not only to the structure, but to any equipment you might have left for the tenant to use.