Once your property is designated not as your primary residence but as a rental, your homeowners insurance provider will amend the homeowners insurance policy for the property. This is important in order to retain as much insurance protection as possible for your rental property. It goes without saying that the tenant has the legal right to terminate the rental agreement if the premises is damaged or destroyed in any way other than by the wrongful or negligent acts of the tenant, to the extent that normal use and occupancy is substantially impaired.
Landlord's Insurance vs. Tenant's Insurance
Lease agreements should state that the landlord’s insurance does not cover tenant’s personal possessions in the event of loss or damage due to fire, windstorm, flood, theft, vandalism, or other similar cause.
The tenant should be advised to obtain renter’s insurance to protect their investment in their personal property. Furthermore, the lease should state that the tenant is liable for any personal injury or property damage caused by the negligence or willful acts of tenant, and that the landlord is liable for any personal injury or property damage caused by the negligence or willful acts of the landlord.
Best Practices
To make sure you are covering all of your bases with insurance and your property, make sure to document, with photos with time and date stamps, the physical property inside your rental. This serves two purposes - evidence of property condition and existence of specific items for insurance purposes, and the same for documenting and damage during a tenancy. Finally, always consult with your insurance agent about your rental property prior to signing on with your first tenant. Your insurance agent can advise you on the appropriate steps to keep the value of your asset protected.