Difference Between Home Insurance & Rental Property Insurance
A common misconception about home insurance is that as long as the home has insurance it is insured and that it does not matter if you have renters. This is simply not true. When applying for insurance you must be up front with the Insurance Company; who lives in your house and what your property is being used for. The consequences of not being up front with your insurance company can be disastrous and may result in a denied claim should the insurance company find out the occupancy of your property is different than described. Even if what you first told them was accurate, and later it has changed you should call your insurance company to update them on this change. Look below at common scenarios which you should tell your insurance company.
Scenario 1: Your First Home
You just bought your first home, in order to help you pay off the mortgage sooner you decide to rent out the basement.
- Even if you are living in the house, your insurance company has to be notified. Typically, regular home insurance companies can add a rented suite onto your existing home owners policy for the home your are living in, and also add rental income protection. This will protect your rent for a specified time and limit if a claim happens.
Scenario 2: Promotion
You just got promoted! Congratulations. Your promotion requires that you run the head office and you have to move from Toronto to Hong Kong. You decide that Toronto home prices are always soaring and it will be better just to rent out your current home and then move back to Toronto one day.
- Typically, regular house insurance companies will not insure your property as a homeowners under this scenario and you will have to seek a commercial rental property policy. Don’t forget to hire a property manager or have a designated individual responsible for maintenance and repairs.
Scenario 3: Renting to Students
Your home in Central Toronto is located close to Universities and Colleges and your basement has a walk out entrance and 3 rooms and a kitchen and is totally separated from the main and second floor where you live. A perfect set up to rent out to students.
- As soon as you rent your property to 3 unrelated individuals regular home insurance companies may consider this to be a rooming house, even with you living in it! Typically, you will than require a commercial policy. While you may obtain some type of insurance for your dwelling in this case, you forgo the coverages a typical homeowners policy provides such as personal liability, additional living expenses, personal contents and others.
Scenario 4: From Condo to Home
You’ve been living in a condo and decided to purchase your first house, instead of selling your condo you’ve rented it out and got a new insurance company for your new house. This scenario, your condo if rented to 1 family can typically be added to your house insurance policy or you can even have a standalone policy but it its imperative you tell the Insurance Company for your condo that it is no longer occupied by yourself but by a tenant.
Many different scenarios exist, the above information shouldn’t be relied upon without speaking to your own Insurance Professional so they understand your exact situation. If you have questions please give one of our offices a call.
TD;DR – So What really is the Difference
A lot, rental property policies are different than homeowners policies and not declaring your property accurately can result in a denied claim.