Rental property insurance is considered a fundamental stipulation in a rental lease agreement. Renter property, which is becoming a common industry within the broader real estate market, calls for the renting of a property by an individual or group of individuals. The property is still owned by the company or individual renting it out, however, the renter, while under contract pays monthly payments to reside in the dwelling.
To solidify the contract the two must incorporate some form of rental property insurance. This stipulation protects both the renter and entity who owns the company against the majority of risks that can damage a property. The typical risks that rental property insurance protects against are the damages associated with various forms of weather or natural disasters. These include: fires, floods, earthquakes, winds or hurricanes, and tornadoes.
Rental property insurance typically comes in two forms–open perils and named perils. A rental property insurance that comes in an open peril covers all the causes of loss not specifically excluded in the agreement or policy. Common exclusions for an open peril policy include: damage resulting from floods, earthquakes, nuclear incidents, and acts of war or terrorism.
In contrast, named perils are types of insurance for rented property or owned property that require the actual cause of loss to be outlines in the policy for the damages to be properly insured. Named peril rental property insurance is the more common form of policy, and it typically includes protection against such damage-causing events as lightning, theft, explosions, and fire.