Rental property insurance: What does it cover & when do you need it?

If you rent out your house infrequently and for short periods of time, your homeowners insurance may provide coverage if you let your insurer know it’s being rented in advance. But if you rent out your home for months or years at a time, you’ll need rental property insurance, also called landlord insurance, to cover the unique risks that come with renting out property.

What does rental property insurance cover?

If you rent out your property long term as a source of income, you’ll need rental property insurance. A typical policy covers damage to the structure of your rental property, personal belongings (like appliances or maintenance equipment) on-site, legal or medical expenses if a tenant or guest is injured on the property, and loss of rental income if you’re not able to rent out the property due to a covered loss.

Rental property insurance includes the following coverage:

• Dwelling coverage: Covers the physical structure of the rental property if it’s damaged by a covered peril, including fire or a major storm 

• Coverage for landlord’s personal property: Covers items and appliances owned by the landlord, like dishwashing machines, washer and dryers, and items used for maintenance like shovels, rakes, and lawnmowers

• Liability coverage: Covers legal or medical expenses if a tenant or visitor are hurt on your property and file a lawsuit

• Loss-of-rent coverage: Reimburses you for missed rent payments if you're unable to rent out property due to a covered loss

Keep in mind that when you file a claim for property damage or loss, you first have to pay your policy deductible, which is the amount you’re responsible for covering on a claim before your insurance kicks in to cover the loss.

What does rental property insurance not cover?

Rental property insurance includes some amount of coverage for the landlord’s personal belongings on the property. An example of this could be gardening tools that you keep in a maintenance room, or patio furniture in an outdoor common area. 

However, there are things landlord insurance does not cover, including:

• Tenants’ furnishings or personal belongings: Rental property insurance doesn’t cover tenants’ personal belongings inside the rental unit. Your tenant will need renters insurance to cover their own property. 

• Maintenance issues: Wear and tear or maintenance issues also aren’t covered by rental property insurance. Landlord insurance also doesn’t cover negligence, so if you knew about a gas leak and it eventually resulted in a fire or explosion, you likely won’t be covered.

• Damage or loss while the property is vacant: Rental property insurance won’t cover buildings that have been vacant for a certain number of days, so if the duplex you rent out has been empty for a few months and there’s a break-in, your insurer may not cover the loss.

• Flood or earthquake damage: Landlord insurance does not cover damage that occurs due to flooding or earthquakes unless you have additional coverage in your policy.

How much does rental property insurance cost?

A standard homeowners insurance policy costs around $1,250 on average, but varies greatly nationwide. Landlord policies generally cost about 25% more than standard home insurance. [1] One of the reasons landlord insurance costs more is because of the increased protections and risks. When calculating your quote, insurers also take the build, age, location of your residence, and more into account.

Learn more about how premiums are calculated here. 

Do I need rental property insurance if I already have homeowners insurance?

Whether or not you need rental property insurance instead of homeowners insurance will depend on if you are renting the home out on a short-term or long-term basis. 

Short-term rentals

If you live at your residence full-time and rent it out infrequently, like for a weekend once every six months, your home insurance may cover you, but be sure to check with your insurance company about it.

If you regularly rent out your home on a short-term basis, like if you Airbnb a room in your house every other weekend, your insurer may require you to add short-term rental coverage to your policy. Talk to your insurer about how often you plan to rent out your home to make sure you’re properly covered in the event of a loss. 

Long-term rentals

You only need rental property insurance if you have tenants who you rent out your home to on a long-term or full-time basis, like for months or years. Normal homeowners insurance excludes coverage for business property, and a rental property would technically fall under that category since you make an income off of it.