In the country of the U.S.A., between 60-70 per cent of Americans own their homes. This leaves the rest for renting. Apartment complexes cover some of that percentage renting and the rest are renting from individuals who are renting a second home that they own.  
These individuals sometimes do not know that they need, for their own protection, to get rental property insurance. Getting the proper coverage could mean saving from financial disaster. For example, an average homeowner’s policy will not cover any damage if the homeowner/payor of the homeowner’s policy does not live in said domicile. 
Sometimes called Landlord insurance, you need to carry this insurance for your second home because there is a whole new set of risks involved with having a renter in this home.  For starters, you would typically take better care of this home than the renter would.
Insuring Commercial Property
In the world of business, this rental home is now a commercial property. Sometimes called a dwelling short for a tenant-occupied dwelling.  This changes the conditions of insurance real fast.
There are a lot of questions to ask and things you would not even know to ask when it comes to this type of commercial insurance. You are not going to be the expert, but make sure that you consult those who are. The folks over at strongly advise making sure you enter into this rental business with the knowledge to keep you on top. 

Types of Rental Policies

There are generally three types of dwelling policies-DP1, DP-2 and DP-3.  The first, DP-1 is the least expensive and basic and only generally covers vandalism to your property and theft.  The DP-2 expands its coverage to fire, windstorm damage and other such related risks.  DP-3 covers all unless they expressly exclude a certain peril.
DP-3 is obviously the best protection that you can get.  But there is also another very good reason to consider this extensive coverage.
Have you ever heard the phrase “cash value” when it comes to insurance? Knowing the definition is crucial no matter what type of insurance you are looking into. 
An example a lot of us can relate to is this: You have a car that you still owe $3700 in accrued payments for to your lender. You go through a traffic light and get t-boned.
Nobody is hurt, but your car is now totaled by your insurance company and they hand you over a check for $1700. What happened? They paid you for the cash value, or depreciated value, of your car. You now owe $2000 for a car that is on its way to the junkyard.
The term cash value also refers to the value depreciated of your home. The home is 30 years old and suffers a fire. The insurance company will cover the cost of the depreciated value of the 30-year-old home. Depending on the damage extent, this difference in what the cost of repairs is and what the insurance pays you could be huge and possibly devastating to your wallet.
money and dollar notes
With the DP-3 dwelling insurance, the replacement cost is what will be paid to you, not the depreciated value of the home.
You get what you pay for with the DP-3 versus the DP-2…let’s just hope you never need to use it.

Other Benefits

With a landlord policy, you may also be protected from your home being vacant because of said fire and repair time or other issues. This is sometimes called fair income rental protection. This coverage is well worth it.

Renter’s Responsibilities

Your renter’s possessions (furniture, clothes, electronics) will not be covered by your landlord policy from your insurance carrier and it is worth telling your renter that information or even take another step and require them to carry renter’s insurance for your and their piece of mind.

Rental Property Insurance Cost

This number changes regionally, but you can count on your landlord’s insurance to cost 20 to 30 per cent more than your homeowner’s insurance for the same property.

You Have The Facts

Knowing that you are a homeowner and now have a second home that you must figure out how to still break even is tough enough. As a layman, you must now manoeuvre through business decisions you were never prepared for. The aim of this short article gave you a bit more business sense to do so. However, always keep in mind that consulting professionals is the best way to move forward.
Find more tips on how to safeguard your home here.
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