Insurance for a House Hack

[Tyler Holzer]

Hi everyone! I’m gearing up to close on my first duplex next week, which I will be house hacking! Living in one unit and renting out the other to tenants. I need to finalize my insurance before close, but I’m unclear on what kind of coverage I should get since it’s half rental property and half owner occupied. Even my insurance broker is a little confused. He did stress that we should require the tenants get their own personal liability and personal property insurance, but I wanted to see what BP thought.

Does anyone have any experience with this, or know how I should go about insuring the property? 

Bonus Question: Do you require your tenants to get their own renter insurance policy? What are the pros and cons of this?

[Andrew Terrell]

@Tyler Holzer,

I have been house-hacking a duplex in the Oklahoma City metro area for a few years. Insurance for housing like this should be pretty straightforward. You may have to shop around through a few providers, but I would just recommend trying to find an insurance broker. They should have access to multiple product types, as well as multiple providers. 

I have a home-owners policy on the side of the duplex I reside in. It is a similar policy to what someone would get on a single family home. It is a Replacement cost policy, with wind, hail, fire etc. as well as liability coverage (your insurance agent should be able to help guide you on what makes sense for your needs, and the area of the country you live in) with coverage of my personal belongings too.

Then I have a separate landlord policy on the side that I lease out to a tenant. Again, this is just a standard landlord policy with Replacement Cost coverage, rather than Actual Cash Value coverage. I still have liability coverage on this policy too. I also carry an Umbrella Liability insurance policy ($1,000,000 in coverage, for about $150 a year). The umbrella policy is not tied to my duplex, but I carry that since I bought the duplex in my name rather than in an LLC, or some other legal business entity.

When I find another property to live in, I will only carry one landlord policy, that will give insurance coverage for both units, but just on one policy. That will be a landlord policy, and I will carry replacement cost coverage. This will lower my total insurance bill for this property, since there will be one vs. two policies like I currently need. I have heard of some people who house-hack that only carry one policy, even when they live there. This was not the path I chose. Maybe some people who are smarter on the insurance side of the aisle can weigh-in on the pros/cons of carrying one, or two policies while you're there, and for after you move out.

My leases states that I am not liable for their personal belongings, and that they are required to insure their belongings through a renters insurance policy. These are typically really cheap policies anyways. I would review your local landlord tenant act/laws, and talk to some other investors in your area about wording they have in their leases regarding this topic.