Dwelling Fire Insurance is most commonly purchased for residential properties that you don’t own and don’t need comprehensive coverage on. For example, a residential rental property that you own, did not finish & rented to a tenant. Since dwelling fire insurance is a type of policy most commonly purchased by those who own residential properties and then rent / lease out, this policy is also commonly referred to as Landlord Insurance.
A dwelling fire insurance policy can also be used for a homeowner that cannot obtain standard homeowners insurance due to various reasons such as claim history, poor property conditions, & bad credit. However, a dwelling fire policy does not provide the same property coverage benefits that a standard homeowners policy provides. In fact a dwelling fire insurance policy is much more restrictive from a coverage standpoint when compared to a standard homeowners insurance policy. Primarily, a dwelling fire policy only provides coverage against certain “named perils” including lightning, fire, wind damage, hail or sleet, sinkholes, riot, smoke damage, and explosion. A standard homeowners insurance policy does not have this “named perils” coverage wording.
Insurance Coverage Breakdown
The coverage amount a dwelling fire insurance policy will pay to rebuild your property if it is destroyed. This is the amount to rebuild from the ground up and not a market value.
Provides coverage for common structures that are not attached to the dwelling such as sheds, detached garages & gazebos. Unlike a standard homeowners policy this coverage is not always automatic on a dwelling fire policy. Depending on the current setup of the property you’re renting, you may not need this coverage at all and can usually remove the coverage if needed.
Personal Property on a homeowners insurance policy provides coverage for items such as furniture, appliances, clothes, electronics etc. A dwelling fire policy on the other hand will usually have this coverage excluded from the start. The reasoning for this is that the tenant of the property should have their own renters insurance policy to cover their personal property. That all being said, landlords can optionally include personal property on a dwelling fire insurance policy for appliances they may have furnished at the property.
Loss of Use or Fair Rental Value
Specifically on a dwelling fire insurance policy- This coverage basically reimburses you for lost income sustained when your rental property is made uninhabitable due to a covered claim i.e. fire. Keeping current records of rental income is highly recommended as it will help expedite things from a claim experience standpoint. Some insurance companies also have a wait time of 48 hours before this coverage will actually start paying out.
Unlike standard homeowners insurance, not all dwelling fire insurance policies offer personal liability insurance. When personal liability coverage is made available in a dwelling fire insurance policy coverage includes protection in the event you become a defendant in a lawsuit. More importantly it can provide defense costs if you’re directly sued by the tenant for common tenant related claims such as wrongful eviction & evasion of privacy.
- NOTE- Via endorsement, you can usually extend the liability coverage on your homeowners insurance policy to cover rental properties. This would be for liability coverage only; you would still need to obtain insurance on the home structure itself.
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