Landlord insurance policy: The complete guide

As a landlord, you’re responsible for tracking and managing many different things in your rental home. Not only do you want to ensure that your property is functional for your tenants, but you also want to protect yourself from any liability or financial loss should something happen. 

In order to have a successful experience with both short- and long-term tenants, it’s important for landlords to fully understand the different types of homeowners insurance coverage that are necessary. Read on to learn more about landlord insurance policies, including how to calculate how much coverage you need, average policy costs, and when you should consider filing a claim.

Key takeaways

• Landlord insurance policies are intended for homeowners who don’t live in the property but instead rent it out to others.

• Coverage from a landlord policy may be limited to the dwelling itself and liability protection.

• Tenants should still purchase their own policy, which provides protection for their personal belongings, liability, and even loss of use coverage.

• On average, landlord policies cost about 20% more than standard homeowners insurance coverage on the same home when owner-occupied.

What is landlord insurance?

A landlord insurance policy, also known as DP-3 coverage, provides landlord homeowners with dwelling protection when renting out their property to tenants. This special type of coverage is necessary because landlords need different homeowners insurance protection than owners who also live in the home full-time. 

Common homeowners policies, like HO-3 insurance coverage policies, are intended to cover owner-occupied primary residences. In many cases, these policies won't cover any damage or liability claims when renting out that home to others. Instead, as a landlord, you’ll need to buy specific insurance coverage that protects your dwelling from unexpected damage and extends your personal liability coverage.

As a landlord and homeowner, you’re still responsible for your home’s structure and things like appliances that stay with the property. You can also be held liable for any injuries that tenants or guests sustain on your property, especially if they’re found to be caused by your negligence. This is why buying adequate landlord property insurance is so crucial.

Determining tenant type

The type of tenant you have will dictate the type of landlord insurance coverage and level of protection you need. While long-term rentals typically need more traditional landlord insurance policies, shorter rental terms require different coverage, which is known as short-term insurance.

Rental platforms such as Airbnb, VRBO, and Furnished Finder have skyrocketed in popularity in recent years and are especially popular in big cities, high tourist areas, or near hospitals with travel nurse contracts. Because of this, short-term rentals can be a great way to amplify your earnings and keep a revolving door of new tenants.

However, it's important to understand that short-term insurance for landlords involves different considerations to ensure that your dwelling and personal property are protected while also meeting your insurance company's requirements. In some cases, you may need to purchase both short-term and landlord insurance when renting out your property. (Note that these two coverages are not the same.)

What does landlord insurance cover?

Landlord rental insurance is designed to protect a home you own but don’t live in, cover your dwelling and other eligible structures on the property, select personal property, and even provide you with personal liability coverage. This is very similar to a standard homeowners policy, though there are some specific caveats to keep in mind.

• Dwelling coverage — Landlord building insurance protects the actual structure of your home if it’s damaged or destroyed by a covered peril such as fire, lightning, wind, or smoke. 

• Other structures — This section of your policy covers other structures on the property if they’re damaged or destroyed by a covered peril. Eligible structures can include fences, sheds, decks, detached garages, and more.

• Personal property — Unlike standard homeowners insurance, this section of coverage doesn’t protect all of your personal property since you aren’t the one living in the home. Instead, this area of landlord insurance coverage is intended to protect property that stays with or is used to maintain the home, like lawn equipment and even appliances. (This is similar to, but more limited than, equipment breakdown coverage, which extends to HVAC systems, appliances, boilers, and more.)

• Liability — Certain liability issues will be considered the tenant’s responsibility and will fall under their own renters’ insurance policy, if one exists. However, if you are found responsible for an injury on the property, regardless of who lives there, this liability insurance coverage can help provide you with financial protection.

Depending on where you live, you may want to consider purchasing supplemental coverage to further protect yourself and your home when renting out the property. For example, you might buy earthquake coverage if you live near the coast or fire insurance if you live in an area prone to wildfires. 

What does landlord insurance not cover?

Though a landlord's insurance policy covers a lot of the same losses as a standard homeowners policy, not everything will be included. Understanding the limitations of your new coverage is key to protecting your home and financial status. 

So, what is not covered by your landlord insurance? Typically, the following are not covered:

• Your home and personal belongings if you live there with the tenant

• Your tenant’s personal belongings

• Standard maintenance or repairs on installed home appliances

• Personal belongings that don’t have to do with maintenance or upkeep of the property

• Property damage from certain excluded perils

First, it’s important to understand which situations qualify for landlord insurance coverage and which don’t. Say that you plan to lease out one room or floor of your home while you still live in another area. While you may technically meet the definition of a “landlord,” a landlord insurance policy won’t cover any home that property owners share with their tenant. The property cannot be your primary residence if you want to secure this type of coverage.

Even if you do qualify for landlord insurance for your rental property, there are still things that won’t be covered. Examples include any personal belongings of yours that don’t have to do with maintaining the home, as well as any personal items that belong to the tenant. 

Instead, you might require your tenants to purchase their own renters insurance. Landlords can even include this as a condition of the lease agreement. Renters insurance will help protect your tenants in case of personal property damage or even provide them with relocation expenses if the home is damaged and deemed uninhabitable. This gives them peace of mind and serves to keep the financial ramifications from bouncing back to you.

How much does landlord insurance cost roughly?

Just as with owner occupied homeowners insurance coverage, many different factors can affect the cost of your landlord insurance policy. 

Common factors that influence premiums include things like: 

• Location of your home

• Age and condition of the home

• Size and value of the property

• Important features like the roof, appliances, and HVAC system (and their age)

The amount of coverage and the deductible you choose will also play an important role in determining your costs. 

Whether you own a standalone home, multi-family property, or condo, landlord insurance usually costs upwards of 20% more than you would for standard home insurance on the same property. So, for example, let’s say you pay $1,000 each year for your home insurance coverage when the property is your primary residence. Once you begin to rent it out, though, your annual premium may jump up to $1,200. 

Of course, there are ways to get your landlord insurance costs down. There may be discounts available for repairing or replacing older features in your home.  While costly upfront, they may reduce your insurance premiums over the years. Installing smart home devices that help monitor your property is another great way that may lower your insurance premiums.

Is landlord insurance more expensive than homeowners insurance?

As mentioned above, a landlord’s insurance coverage is typically more expensive than owner occupied homeowners insurance cost for the same property. 

It's assumed that renters won't take care of the property the same way the homeowner would, so the home may be at a higher risk for loss when rented out. Having someone else living in the home also opens the homeowner up to certain liability if another individual is injured on the property. For these reasons, you’ll likely need to ramp up the liability and dwelling coverage on the home once you start renting it out. 

Additional landlord insurance options

To extend your financial and legal protection, there are many different endorsements available to add to a landlord policy. From additional coverages against common perils to protection for multiple properties, here are some of the additional insurance options you may want to consider: 

• Additional construction — This add-on will help cover the cost of repairing or rebuilding your home after a natural disaster or covered loss, if the cost exceeds your dwelling coverage limit.

• Commercial policy — If you own multiple rental properties, you may want to consider a commercial policy to help protect a larger portfolio of assets all at once.

• Flood insurance — Many homeowners insurance policies exclude floods as a non-covered peril. With flood insurance coverage, you can help protect yourself from flood damage and limit the cost of repairing your home should flooding occur.

• Vandalism — Not always covered by home insurance policies, vandalism protection helps pay for repairs should your tenant or a guest vandalize your property.

• Loss of rent — Similar to loss of use coverage, loss of rent protection covers you, the property owner, against lost income if the home becomes uninhabitable due to a covered loss.

                                                                                                                                                                                                                                                                                             Choosing the right coverage can make or break your ability to be a successful and long-term landlord, no matter how you plan to rent out your property. Have other questions about how a landlord policy differs from your homeowners insurance policy or which endorsements make the most sense for your situation? Head over to our FAQ page for more information, or contact one of our home insurance agents directly.

Still have questions?

Here are a few of the most frequently asked questions about landlord insurance coverage.

Do I need landlord insurance?

If you own a home that you rent out to others, you will likely want to purchase a landlord insurance policy. This coverage can provide financial protection against various losses, while landlord liability insurance covers you if someone is injured on the property.

As a landlord, do I require landlord contents insurance? 

As a landlord, renters insurance coverage is a wise requirement for your tenants. This policy may protect your tenants’ personal belongings, and may also provide them with liability coverage and even protection for living expenses if the home is damaged or destroyed. 

How can I file an insurance claim as a landlord?

If your property suffers a covered loss, you can file an insurance claim by contacting your landlord insurance carrier directly. Many insurance companies today allow you to initiate a claim through a mobile app or web platform, though you can also call to speak with an agent.

Is there a tax deduction for landlord insurance?

Many eligible expenses can be deducted by landlords at tax time as long as they are relevant to managing your rental. This can include things like landlord insurance premiums.

Is the loss of rental income covered by landlord insurance?

In addition to providing liability and building insurance, landlord policies may also offer coverage for loss of rental income. This coverage can help provide financial protection if the property is damaged or destroyed and your tenants are forced to move out. Be sure to check out your available landlord insurance coverage options to see whether or not loss of rental income protection is available.

If I reside on the property, do I also require landlord insurance?

Landlord insurance is designed for individuals who own property that they rent out to others, and that is not used as their primary residence. In the case of landlords and tenants living together, the insurance requirements should be two-fold: for tenants, personal belongings and liability coverage through renters insurance; for landlords, a homeowners insurance policy that offers dwelling, personal property, and liability coverage.

 

The materials and information on this website are intended for informational purposes only and should not be relied upon as a professional opinion whatsoever. Some of the information may be dated and may not reflect the most current and accurate information. Consult your insurance agent for any questions, advice, or guidance.