insurance

Renting out a home? Get the right insurance

Most insurance brokers suggest landlords opt for a DP-3 policy. "For example, a DP-1 gives you only actual cash value on the house, where a DP-3 will give you its replacement cost," Mills says. Translation: With cash value, a roof that's 10 years old will be written down because of its age. With replacement value, you get the cost of a new roof. "It's more common for landlords to get a DP-3 policy."

Other insurers offer what are called landlord protective policies. They cover areas like equipment breakdown coverage for things such as boilers and furnaces.

Another area to consider coverage for is loss of rental income, should the building have to be emptied for repairs. Carrasquillo says "a lot of landlords think that if their apartment is unoccupied because a tenant leaves or is evicted, they can make a claim for loss of rental income. That's not true. There has to be a covered loss that causes you to lose income while the property is being fixed."

Also make sure you have sufficient liability coverage. "I encourage landlords to insure at $1 million on a rental," says Hoffman. Liability coverage protects landlords if they're sued for damages, such as from an indoor fall, an animal bite or someone slipping on a wet sidewalk. "It's only an additional $200 to $300 annually to go from $500,000 to $1 million in coverage."

The cost of landlords insurance

There's no question you'll pay more for a landlord policy than for a standard homeowners policy on the same property. But not all that much more, says Hoffman.

"In my area, the typical dwelling fire or landlord's protective policy will run $800 to $1,200 annually," says Hoffman. "A standard homeowners policy is $700 to $1,000 depending on the size of the home."

Hoffman has one more piece of advice: "Always make sure your tenants secure renters insurance" to cover the tenants' personal property.

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