When you're ready to move, but you can't or don't want to sell your house, renting it might seem like a workable option. You face a potential pitfall, however, with regard to your insurance coverage. Your regular homeowners policy probably won't cover damage caused by tenants.
Your Tenant's Security Deposit
If your tenant damages your property, you’d typically pay for repairs with his security deposit. That's what security deposits are for, and they can cover less costly problems. You'd only make a claim to your insurance company if something catastrophic occurred, such as if your tenant burned your house down, drove his truck into your living room or left the tub running, flooding the place. You'll need insurance to cover the costs of repairs that exceed the amount of security you required from your tenant.
Your Homeowners Policy
Your homeowners policy probably won't pay for serious repairs if you've rented your home. Your insurance company probably issued your homeowners policy on the assumption that you'd be living there. Review your policy or call the company to make sure. It's better to know ahead of time that you need to change coverage, instead of finding out later when you make a claim and the company denies it.
Instead of homeowners insurance, you'll need landlords insurance, sometimes called rental home insurance, if you rent your house. A simple rental policy will cover you if your tenant causes a fire. More extensive policies cover specific perils, such as if your tenant's unhappy girlfriend vandalizes the place to get even with him. The best policies cover everything except what they specifically say they won't pay for. As with all insurance, the more coverage you want, the higher your premiums will be. On the bright side, these policies don't just cover human-caused damages. They typically cover natural disasters and things like trees falling on your house as well, just as your homeowners policy would if you were living there.
Most insurance companies will let you buy extra coverage to address additional pitfalls of renting your home. Protective policies can insure you, for example, against breakdown of furnaces and hot water heaters. You can't expect your tenant to live there without these things, and it would be your obligation as a landlord to replace or repair them. You'd have to come out of your own pocket if you don't have extra coverage. You can also buy coverage against loss of rental income, if the damage to your home is so bad that no one can live there while you have it repaired.
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