Can I Get Homeowners Insurance if I Rent to Own a House?

After you’ve signed a rent-to-own agreement and prepare to move into your new home, it’s important to talk with your landlord about the homeowners insurance coverage for the property. Specifically, you’ll want to know what exactly the policy covers. This will help you determine what additional coverage you’ll need to protect your assets and personal possessions.

TL;DR (Too Long; Didn't Read)

If you sign a rent-to-own agreement on a new home, you'll need to ask your landlord about the homeowners insurance coverage for the property. Then you will have to determine via renters insurance if you'll need additional coverage not included in the homeowners insurance.

Rent-to-Own Agreements

A rent-to-own agreement is a contract between a tenant and property owner that gives the tenant the option of purchasing the home after a specified amount of time. In the interim, the tenant lives in the home and pays rent, with a portion of the rent set aside as a “lease fee.”

The landlord deposits this fee in a separate account for the tenant, who can use the accumulated funds toward the down payment on the house if he decides to go forward with the purchase. If he decides not to purchase the home, the funds will legally belong to the landlord.

Evaluating Legal Implications

Although the tenants in many rent-to-own situations fully intend to purchase the rental property, they are not the legal homeowners until they formally purchase the house. In the meantime, it is the landlord’s responsibility to carry homeowners insurance on the property for both liability and structural protection.

If there is a fire or the home is damaged by wind or lightning, it is this policy that will pay to repair the damage. What this policy will likely not cover, however, is the tenant’s valuables and personal property.

Defining Renter's Insurance

As a tenant in a rent-to-own agreement, the only way to protect your valuables is through a renter’s insurance policy. These policies provide both liability coverage and coverage for possessions such as electronics, clothing, flatware, jewelry and furniture. Under most renter’s insurance policies, coverage is available for events such as fire, theft, vandalism, windstorms and lightning.

Most natural disasters, on the other hand, are not covered by renter’s insurance. Neither is damage caused by the tenant, their sublessees, or their pets.

Purchasing Renter's Insurance

Tenants who are looking to purchase renter’s insurance should compare policies from a few different insurers. When comparing policies, it’s important to pay close attention to deductible amounts and category limits.

These limits are very important, as they determine how much of a given category of items a policy will cover. Some policies will cover only $2,000 in jewelry, for example, or up to $5,000 for a computer. Additional riders are available for purchase when more coverage is needed.

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