Do I need to change my homeowners insurance if I rent out my house?

Renting out your home usually means you need to change your homeowners insurance policy, but there may be exceptions. It all comes down to which insurance company you choose and how you intend to rent your home.

If you’re renting it out once or twice a year for short periods, like during a weekend when your town is hosting a major concert or sporting event, you may be covered by your current home insurance policy.

But if you plan to turn your home into a seasonal or long-term rental, or regularly rent it out through a platform like Airbnb, you’ll need a landlord insurance policy.

How renting out your home changes your insurance needs

Renting your home changes how your property is used, who’s utilizing it, and what liabilities you face. Here’s how this impacts your insurance needs:

• Occupancy and oversight shift: When you live in a home, you’re around to notice leaks, address wear and tear, and oversee maintenance. But when you move out and tenants take your place, you lose that day-to-day oversight and increase the likelihood of unnoticed damage.

• Use by other people: Tenants and short-term renters behave differently than you would in your own home. With more foot traffic, a lack of familiarity with appliances and utilities, and (in some cases) less respect for the property, there’s an increased chance of accidents or damage.

• Liability exposure: Your personal liability coverage likely excludes claims that stem from business activities — like renting out your home. To protect yourself if a tenant or guest is injured on the property due to a covered cause, you’ll typically need a landlord (dwelling) policy that includes landlord liability coverage.

• Loss of income risk: That cash influx from a rental property is great, but if you depend on it and your home becomes uninhabitable due to a covered event, you won’t be able to recoup that income with a standard home insurance policy. You’ll need fair rental value coverage, which may be included with landlord insurance or added as an endorsement to a landlord policy.

• Personal belongings: Once you move out, you only want to insure the dwelling itself, plus any furniture or appliances you leave in the unit for tenants to use. The tenant should carry their own renters insurance policy for their personal belongings.

Homeowners vs. landlord insurance

If you decide to rent out your home for a weekend on a whim, you might be covered by your homeowners insurance policy. However, some companies may require a special endorsement (also called a rider). Review your policy closely, and reach out to your insurance company if the details are unclear.

Homeowners who intend to rent their home more regularly — whether full-time (typically six months or longer), during peak tourist season, or short-term on platforms like Airbnb — will likely need to switch their policy to landlord insurance. But what’s the difference?

Landlord insurance comes in various forms called dwelling policies. The specifics of the three primary types — DP1, DP2, and DP3 (with DP3 being the most comprehensive) — will vary by insurance company. But in general, dwelling policies typically include:

• Dwelling coverage and other structures coverage for the home’s physical structure and detached buildings like a garage or shed

• Personal property coverage for any belongings you keep in the home for tenant use

• Fair rental income protection, if your home is uninhabitable due to a covered peril

• Personal liability coverage in case someone is injured

Even if the coverages seem similar, homeowners policies aren’t designed for rental use. Once your home becomes a rental, standard policies may no longer apply.

The cost of homeowners vs. landlord insurance

Landlord insurance costs about 25% more than a standard home insurance policy, according to the Insurance Information Institute.

When you may need to change policies

There are a few scenarios you might encounter as a homeowner exploring renting out your property:

• Full-time rental: If you plan to move out of your home entirely and rent it out to a long-term tenant on a six-month or one-year lease, you absolutely need to get landlord insurance.

• Seasonal rental: If you own a vacation home and plan to rent it out during the high season for tourists, you’ll likely need landlord insurance. If you have second home insurance on your vacation property and only plan to rent it out a few times a year, speak with your insurer about your options.

• Renting a portion of your home: If you still live in your home but plan to rent out a bedroom, basement, attic, or even the garage, it’s important to speak with your insurance company about the best policy for your needs. Depending on your insurer, these activities may require a homeowners policy plus an endorsement, a landlord policy, or a hybrid policy of some sort.

• Airbnb-style hosting: Frequent short-term rentals, especially through platforms like Airbnb or Vrbo, are typically considered business use. That usually requires a specific endorsement or a dedicated policy.

The best rule of thumb? If you’re thinking about renting your home in any way, contact your insurance company before taking any action. An agent can make sure you’re fully covered before your first renter sets foot inside your home.

What happens if you don’t update your insurance

Operating your home as a rental without switching from standard homeowners insurance to landlord insurance can land you in a lot of trouble, such as:

• Claims denials

• Policy cancellation

• Liability exposures

• Lost income

• Potential violations of your mortgage

The benefits of a House & Property (HD3) policy

If the thought of switching policies to turn your home into a rental has you stressed — especially if you don’t plan to rent your home long-term — there is another option to consider: a House & Property (HD3) policy.

This customizable policy covers your home no matter how you use it: as your primary residence, as a second vacation home, or as a rental property. A base HD3 policy includes rental property coverage. Owners living on-property at least some of the time can add an owner-occupied endorsement, meaning all the standard coverage you’d expect from a homeowners policy would apply when you’re living there.

Tips for choosing the right policy

Planning to rent out your home? Here are some tips to find the right home insurance policy for your needs:

1. Speak with your current insurer: First and foremost, talk with your current insurance company to understand what policy changes would be necessary and how much it would cost.

2. Shop around with other insurers: You can also get quotes from a few other insurance companies. Just be clear about how you’ll rent out your home so you can get an accurate quote from each insurer.

3. Read all the fine print: Make sure any policy update includes all the coverage types you want, such as fair rental value coverage. Review the policy to understand how any furniture and appliances left in the home will be covered. And always look for exclusions.

4. Require renters insurance from your tenants: If you’re renting your home, require your tenants to carry renters insurance to cover their own belongings. If they’re not sure where to start, recommend the insurance company you use.

5. Reassess regularly: If the way you rent your property changes over time, spend time reviewing your policy and making adjustments to coverage as needed.