What effect does converting a residence to a rental have on insurance coverage?

Converting a residence to a rental property significantly changes the risk profile associated with the property, which in turn influences the insurance coverage terms. When a home is occupied by the owner, it is generally considered less risky compared to when it is rented out to tenants. Rental properties often face different challenges such as higher liability risks, increased likelihood of property damage due to tenant activities, and potential issues with vacancy periods.

As a result, insurance policies designed for owner-occupied homes may not provide adequate coverage for rental properties, leading to a requirement for a different type of policy, such as a dwelling fire policy or landlord insurance. These specialized policies have distinct terms and conditions that reflect the increased risks involved with renting out the property. This means that coverage limits, deductibles, and exclusions may be altered, resulting in a significant change in the coverage terms.

Understanding this shift is essential for property owners to ensure that they have appropriate coverage and are not left vulnerable to potential losses associated with renting out their home.