Do you need Landlord Insurance on Your Long-term Vacation Rental?

Do you own a vacation property or second home that you’re considering turning into a long-term vacation rental?

There could be significant advantages for you. Your home will be occupied, minimizing the risk of any possible undetected concern that could cause damage, such as a leaky pipe. Plus, the income can be a financial boon and help you offset the costs of this property.

However, before you dive headfirst into the property rental business, give your insurance agent a call to review your coverages.

One certain consideration is that your homeowner’s insurance policy won’t offer you the appropriate coverage once you turn your home into a rental.

What’s a Long-Term Vacation Rental?

A long-term rental is different than a short-term property. A short-term rental typically has a specific rental start and end date that’s under a couple of weeks or so. Your tenant is coming to town, enjoying a vacation or two-week workshop, and heading back home.

A long-term vacation rental involves a tenant who will be residing in the house for a longer time—sometimes the end date is unclear. This renter could be in the area for a semester-long internship or a business professional who’s juggling career while looking for a more permanent new home.

Let’s give you a closer look with an example.

You plan to retire to a new state, so you purchased a home in your target area while the real estate market was down and while you’re still working. Every year, you visit that home for your vacation or the holidays, but it sits empty much of the year.

So, to ensure your home doesn’t begin to look abandoned, and to help pay the mortgage and taxes, you decide to rent it out part of the year to an intern or a working professional who’s relocating to the area and needs a home for a few months as they search for a new place.

It’s a win-win. You make a little money, have a tenant who will call you if something goes amiss, and they will only live there for a few months—so you can still enjoy your next vacation.

When you begin renting out your home, you open yourself up to risks that you might not have considered, which is why you must discuss your situation with your insurance agent. Like it or not, you become a landlord and will need the appropriate insurance to protect your assets.

What Does a Landlord Policy Cover?

Because homeowner’s insurance doesn’t cover a home when you’re renting it out, it’s imperative that you obtain the coverage that protects you. While landlord insurance isn’t a state-mandated coverage, your mortgage company will most likely require it (assuming you have a mortgage, that is).

Regardless, we urge you to obtain this coverage, as it can offer you the following vital coverages:

Property Damage
If your second home is damaged by severe weather, fire, or during a burglary, this protects your physical dwelling, swimming pool, hot tub, outbuildings, and any maintenance equipment you may have stored on site.

Liability Coverage

Could a tenant—or one of their guests—possibly slip and fall? You bet! Liability coverage protects you if someone has an accident on your property while you’re renting it out.

Legal Fee Coverage

Should a tenant come to you for damages after an accident, legal fee coverage can pick up the tab for the hefty legal fees that could follow.

Loss of Income Protection

If your rental property is deemed unlivable in the unlikely event of a catastrophe such as a tornado or fire, this offers you protection protects your income stream.

Workers’ Compensation Insurance

Do you have maintenance workers visiting your property to perform routine tasks? Assuming that they have workers’ compensation insurance in case of an injury can be an enormous mistake. This coverage offsets the bills and expenses that result from an injured worker.

What’s the Cost of Landlord Insurance?

Is all of that protection starting to sound pretty smart to you? Your next question is probably about the cost of securing Landlord Insurance.

As with any insurance policy, several factors come into play when quoting a landlord policy:

  • The value of your structures (including home, garage, shed, etc.)
  • Liability insurance amounts (we recommend that you don’t skimp on this!)
  • Property amenities (pool or hot tub)

Again, we will point you back to your local independent insurance agent as the primary resource.

The Bottom Line

Although having your second home rented out bolsters your income and ensures your home is occupied while you’re away, there are inherent risks. Before you rent out your home to a long-term tenant, talk with your local insurance agent about how you can protect yourself.

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