Landlord Insurance in Berks County: What Changes
Why a homeowners policy stops describing a house once you rent it out, what a dwelling policy covers instead, how lost rent gets paid, and when an umbrella belongs on top.
Your homeowners policy is built around the house you live in, and once you move out and rent it to someone else it stops describing your house at all. The fix isn't complicated: you move the house onto a dwelling policy, the one written for a building nobody in particular lives in, and you add liability, because liability is what you're buying the policy for.
That's one phone call. If you don't have an agent, browse an insurance agent in Berks County and pick someone who writes these every week. This is general information, not advice about your own policy; your declarations page and your agent settle any coverage question.
Why your homeowners policy stops working once a tenant moves in.
A homeowners policy covers one particular house, and the form's own words are the problem. It defines the residence premises, the home the policy is built around, as the one-family dwelling where you reside, or the two-to-four family dwelling where you live in one of the units, shown as the residence premises on the declarations. The building coverages and loss of use all hang off it, so once a tenant moves into a house you've left, you're insuring a house the policy no longer describes.
One case runs the other way. If you live in one unit of a two-to-four family house and rent the others, the homeowners form still describes your property, and it carries fair rental value on the rented units. Your own appliances, carpet and furnishings in each rented apartment are capped at $2,500, and that limit pays only for the causes the policy names, theft not among them. If that's your situation, go through the rented units with your agent rather than reading the rest of this post as yours.
Liability closes the same door from the other end. The form leaves out injury or damage coming out of a premises you rent to others, unless that premises counts as an insured location. A house you never live in doesn't meet that definition, so if a tenant's guest falls down the back steps, the homeowners policy won't pay.
Renting is a business as the policy uses the word, whatever it feels like to you. The definition reaches any activity engaged in for money, and the exception that could apply to a rental is total compensation of $2,000 or less in the twelve months before the policy period began, which a house collecting normal rent through a full policy year is past. The form carves occasional rental back out of its business exclusion, but only for a property that's already an insured location, so it does nothing for a house you don't live in.
One more limit sits in the same form, and it's the stretch between tenants to watch. Vandalism drops out once the dwelling has been vacant for more than 60 consecutive days immediately before the loss, and a slow turnover between tenants can cross that line.
If there's already a tenant in the house, make the call now rather than at renewal, and tell your agent when the tenancy started. What your company makes of the months already behind you is a question for your agent. The sooner the policy matches the situation, the sooner the coverage does.
What a landlord policy covers instead, and the part you have to ask for.
The policy built for this is a dwelling policy, for someone who doesn't make the property their primary residence. Its form drops the residency test and covers a one-to-four family dwelling used principally for dwelling purposes.
These come in three grades. The basic form and the broad form each cover a named list of causes, and the broad form's list is longer, adding vandalism, wind and hail, water discharge and the weight of ice and snow. It's typically settled at replacement cost, what it costs to rebuild, where the basic form settles at actual cash value, what the building is worth today after its years of wear, unless you pay to add replacement cost. The special form is the one to ask for: it covers the building against any cause that isn't excluded.
Now the part that costs money if you get it wrong. A dwelling policy typically isn't sold with liability inside it the way a homeowners policy is, and on a rental, liability is the coverage you're buying the policy for. Some landlord packages do include it, which is why you ask for it by name and look for it on the declarations page. The dwelling policy has four parts: the dwelling, other structures, personal property, your own things kept there rather than the tenant's, on a named list of causes rather than the open one the building gets, and fair rental value, the rent you aren't collecting while the house is fixed.
Set the two policies side by side on a rented-out house and the pattern is clear.
| What happens | Your homeowners policy, on a house you've rented out | A landlord dwelling policy |
|---|---|---|
| The building burns or a storm takes the roof | Built around the house you live in, so it no longer describes this one | Covers the building itself |
| A tenant's guest falls on the back steps and sues | Liability is excluded on a premises you rent to others that isn't a place you live | Covered where liability is on the policy; dwelling forms typically don't include it, so check the declarations page |
| The house is unlivable and the rent stops | No coverage for rent you aren't collecting | Fair rental value pays the rent you lose while it's repaired |
| The tenant's own belongings are destroyed | Not yours to insure either way | Not covered; that's the tenant's renters policy |
What moves when the house stops being the one you live in and becomes the one you rent out.
Three of the four homeowners answers trace back to the house you live in, and the landlord answer you have to add is liability, which is the word to say on the call.
How lost rent gets paid while the house is being fixed.
Fair rental value pays the rent you're not collecting while the place is being repaired, minus the costs you stop paying while it's empty, for the shortest time the repair or replacement requires. Say a kitchen fire puts your tenant out for three months: it's aimed at the rent from those months. It doesn't cover a lease being cancelled, so it answers for the building being out of service, not for a tenant leaving. How much you get is a limit on your own declarations page, so read yours instead of trusting a percentage you heard.
When an umbrella makes sense, and what it asks of you.
An umbrella is a second layer of liability on top of the policies you already have, and the condition on it catches small landlords. An umbrella form treats property rented or held to be rented to others as business property, and the carve-out for a rental takes four things: habitational use, fewer than five units at one location, a personal lines primary liability policy covering it, and the rental listed in the personal umbrella section of the umbrella schedule. Miss one and the umbrella treats the rental as business property, and it pays nothing on a claim out of that property unless your primary policy on it is both listed and described on the umbrella schedule.
The same form asks you to keep that policy in force at the limits on its schedule. If that policy is smaller than the schedule requires, the gap is yours rather than the umbrella's. So have your agent confirm two things: that the umbrella accepts your dwelling policy as the policy underneath, and that the rental is named on the umbrella.
What your lender and your township each require.
Pennsylvania's landlord and tenant law sets no insurance requirement; the word insurance doesn't appear in the Act. Your lender is the one party that effectively requires it anyway.
If there's a mortgage on the house, that requirement rides on your own loan documents, so read them and see what your loan asks you to carry. If the house is paid off, skip this one.
Your municipality is a different matter, and it may require you to register the rental and inspect it on a cycle, and those programs look at the unit's condition, not at insurance. Muhlenberg Township charges $50 per unit to register a rental the first time and $25 per unit a year to renew, inspects every three years at $100 per unit, and asks for no proof of insurance. Fees and cycles differ from township to township and change, so check the current ones for your own.
That leaves the policy itself. Call your agent, or use an insurance agent in Berks County to find one who handles rentals, and tell them the house has a tenant. Ask for the special form, ask for liability by name, and ask what the fair rental value limit is.
Frequently asked questions.
Does my tenant's furniture get covered by my policy?
No, and it isn't meant to be. Your coverage is on the structure and your financial interest in it; your tenant's possessions sit outside it. That's why so many leases require a renters policy.
Does a landlord policy cost more than what I'm paying now?
Usually yes. The rule of thumb is about 25 percent more than a standard homeowners policy.
The house is empty between tenants. Does that change anything?
It can. Vandalism coverage drops out once the dwelling has been vacant for more than 60 consecutive days immediately before a loss, so tell your agent when a rental will sit empty.
Two things this post leaves alone: short-term rentals are a different exposure, and taxes belong to whoever does your return.
Sources
- Insurance Services Office, "Homeowners 3, Special Form" (form HO 00 03 05 11), posted by the Nevada Division of Insurance: the standard homeowners policy itself, its definition of the house you live in, the liability exclusion on a premises rented to others, the policy's meaning of business and its $2,000 line, the 60-day vacancy clause, the $2,500 landlord's furnishings limit in a rented apartment, and fair rental value on a unit rented to others.
- Insurance Services Office, "Dwelling Property 3, Special Form" (form DP 00 03 12 02), posted by the Nevada Division of Insurance: the landlord policy's four coverage parts, that it describes the building without asking who lives there, and how fair rental value is measured and for how long.
- North Carolina Department of Insurance, "Dwelling Policies": that a dwelling fire policy is the one used where the owner does not make the property their primary residence, the three grades of dwelling form, and that dwelling policies typically do not provide liability coverage.
- Insurance Information Institute, "Coverage for renting out your home": that a landlord policy generally costs about 25 percent more than a standard homeowners policy, that it covers the structure and your interest in it, and that a tenant's possessions are not covered by it.
- American Alternative Insurance Corporation, personal umbrella policy (form PUP 100): that a property rented to others counts as business property unless it is listed on the umbrella schedule and carries the required underlying policy, and that a shortfall underneath falls on the owner.
- Pennsylvania Landlord and Tenant Act of 1951: that Pennsylvania's landlord and tenant law sets no insurance requirement.
- 12 CFR 1024.37, force-placed insurance: that a lender's insurance requirement rests on the borrower's own mortgage loan contract.
- Muhlenberg Township, "Rental Inspection Program": the township's rental registration and inspection fees and cycle, and that it asks for no proof of insurance.