Final answer:
The most basic policy for rental properties is renter's insurance, covering personal belongings and liabilities for tenants. It compensates for stolen or damaged possessions, and premiums must cover claims, costs, and profits for the insurance company.
Step-by-step explanation:
The most basic insurance policy available for rental properties is typically known as renter's insurance or tenant's insurance. This type of policy is designed to cover personal belongings and liabilities for individuals renting or leasing a property. It generally pays out for stolen possessions or items damaged by fire, storms, or other covered perils. While the landlord's insurance typically covers the building itself, renter's insurance ensures that the tenant's personal property and potential liabilities are protected.
Moreover, a fundamental law of insurance indicates that the total premiums collected from individuals must be sufficient to cover the average person's claims, operational costs of the insurance company, and also provide profits for the firm. This means that, over time, what you pay into your renter's insurance policy must adequately fund the support it promises to provide in the event of a loss.