Can an Insurance Company Cancel Your Homeowners Insurance if Someone Is Renting the Property?

There are different types of residential property insurance, including homeowners and rental property insurance. Homeowners insurance, which is intended to cover owner-occupied housing, features coverages for typical homeowner issues. Rental property insurance is intended for what insurance companies believe to be the higher risk of liability that comes with residential rental properties. Homeowners renting their properties out might be putting their homeowners insurance policies at risk by doing so.

Claims and Cancellations

It's advisable to obtain rental property insurance when you rent out your home or other property. Rental property insurance takes many risk factors and liability issues into account that aren't envisioned under homeowners insurance policies. Additionally, homeowners insurance is specifically written for owner-occupied single-family residences. Homeowners regularly renting their properties out risk policy cancellation or their insurers not honoring claims if they're made under existing homeowners insurance policies.

Homeowners Insurance

Generally, homeowners insurance policies aren't written to cover rental property situations such as tenant-caused damages. Homeowners insurance is normally designed to cover homeowners if their properties burn down, or to cover possessions stolen during a break-in. Homeowners insurance is written to cover medical and legal bills when someone is hurt on a homeowner's property, but not tenants specifically. Most homeowners insurance policies don't offer the range of liability and casualty coverage that rental property insurance does.

Policy Requirement Exceptions

Homeowners insurers sometimes honor their homeowners' insurance policies when rentals only occur occasionally. Some insurance companies, though, might not allow occasional or short-term rentals on homeowners insurance policies at all. Policies vary by insurer, but even the most lenient only allow homeowners to rent their properties out for about four weeks before jeopardizing their homeowners insurance coverage. Lastly, depending on the insurer, homeowners living in the same properties as their tenants might be fine with their existing homeowners insurance policies.

Costs and Categories

Rental property insurance policies generally cost slightly more than homeowners insurance policies, though their prices vary by location. Rental property insurance policies are known as "dwelling policies," and fall into three categories: DP-1, DP-2 and DP-3. DP-1 policies are basic, covering things like fire and vandalism. DP-2 rental property insurance policies cover specific named perils like hail and wind damage. DP-3 rental property insurance is "open peril," and unless a peril is specifically excluded it's normally covered.

About the Author

Tony Guerra


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