Rental dwelling insurance provides the coverage you need to protect your property against physical damage and/or personal liability claims that should arise. The policy provides dwelling coverage, other structures coverage (ie. garages, fences, or sheds), personal property stored on-site, or provided by you for use by your tenants, loss of rental income, and personal liability and medical coverage.
It important to note that rental dwelling insurance only covers the owners building and contents, not any personal property inside the building that may be owned by tenants. Tenants will need to purchase a separate renters insurance policy to protect against damage or loss to their personal property. We also highly recommend our client’s require their tenant to maintain personal liability coverage of at least $300,000. The are two main types of rental dwelling insurance in Texas.
Named Peril Coverage (DP1)
This actual cash value policy covers perils such as fire, explosion, lightning, windstorm, hurricane, hail damage, and vehicle or aircraft. Named peril policies may be less expensive than special form policies, but often times leave off valuable coverage such as water damage, vandalism and malicious mischief, theft, replacement cost coverage, and loss of rental income. In a named perils policy, the policy has to specifically name what is covered. In other words, if the coverage is not named it is not covered.
Special Form or All-risk Coverage (DP3)
This replacement cost policy offers the broadest coverage available for personal lines rental dwellings. The DP3 policy provides special form/all risk coverage and typically includes coverage for water damage, vandalism and malicious mischief, theft, and loss of rental income. Some DP3 rental dwelling policies will also cover damage for back-up of sewer and drains and/or coverage for foundation damage related to a water leak under the foundation.