Homeowners insurance vs landlord insurance

If the home serves as your primary residence, you'll need homeowners insurance. But if you're renting it out for an extended period, you'll need landlord insurance.

Pat Howard 1600


Pat Howard

Pat Howard

Property and Casualty Insurance Expert

Pat Howard is a senior editor at Policygenius specializing in property and casualty insurance. His work has been featured on Property Casualty 360, Fatherly, MarketWatch, and more.

Published June 26, 2019|4 min read

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Homeowners insurance covers far more than just the home itself. In addition to home coverage, your policy also includes personal property coverage, liability coverage, and a number of other protections.

But a standard home insurance policy is only sufficient if the property you’re insuring is your primary residence. If you plan on renting out your house or a second home for an extended period, you’ll need insurance that protects you in ways that homeowners insurance doesn’t. That’s where landlord insurance comes in.

Landlord insurance is intended specifically for landlords and homeowners who plan on renting out their home for an extended period. It includes specialized protection like loss-of-income coverage if a covered loss causes your tenants to move out — something standard homeowners insurance won’t cover.

Key Takeaways

  • If you plan on renting out your home for an extended period, you’ll need landlord insurance

  • Homeowners insurance and landlord insurance are similar, but there are a few key differences

Background on landlord insurance

There are three common types of landlord insurance policies, which are also referred to as dwelling policies:

DP-1 policies

Dwelling-fire form 1 (DP-1) is the most basic option for landlords. DP-1s are named peril policies, meaning you’re only covered from perils listed in the policy. DP-1s are also actual cash value (ACV) policies, meaning if the home is damaged, you’re only reimbursed for the depreciated rebuild value of the property. Although they’re the cheapest of the bunch, DP-1s are far and away the least popular insurance option for landlords, and should be avoided.

DP-2 policies

Dwelling-fire form 2 (DP-2) offers slightly more comprehensive coverage than DP-1s, providing broader named peril coverage (covers 16 perils instead of just 10) and replacement cost value (RCV) coverage for your property. That means if your tenants burn your building down, depreciation isn’t factored into the building’s rebuild cost. It can’t be understated how important the distinction between ACV and RCV is — with RCV you’re potentially saving tens of thousands of dollars in out-of-pocket expenses in the event of a total loss. A replacement cost policy is well worth the additional premium for that possibility alone.

DP-2s also include loss-of-rent coverage, which provides you with supplemental rental income while the rental property is being repaired due to damage from a covered hazard. However, DP-2s typically won’t cover the property if it’s been vacant for longer than 30 days.

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DP-3 policies

Dwelling-fire form 3 (DP-3) is the most common and comprehensive type of landlord insurance policy on the market. In addition to their categorization as a landlord policy, DP-3s are also used to insure non-owner occupied homes and vacant properties.

DP-3 policies are “all-risk”, or open peril policies, meaning your property is covered from every peril except ones that are explicitly listed in your policy. With DP-3s, your home is also protected with replacement cost coverage, and loss-of-rent coverage is included in the policy.

DP-3s are the most common type of landlord insurance policy bought on the market today, but DP-2s are also common depending on whether you require more or less robust rental property coverage.

Homeowners insurance vs landlord insurance

A standard DP-3 landlord policy has many similarities to a standard homeowners insurance policy, but there are a few key differences. For a little refresher, homeowners insurance provides the following base coverages:

  • Dwelling: Covers the home’s structure

  • Other structures: Covers structures on your property that aren’t attached to the home

  • Personal property: Covers your stuff inside and outside the home

  • Loss-of-use: Covers additional living expenses if you’re forced to flee your home

  • Liability: Covers accidental property damage or bodily injury that you’re liable for

  • Medical payments: Covers guests’ medical bills if they’re injured on your property

Let’s start with the similarities. The dwelling, other structures, liability, and medical payments coverage components are virtually the same for homeowners insurance and landlord insurance. Where they differ is the personal property and loss-of-use parts.

With homeowners insurance, your personal property (clothes, furniture, electronics, etc.,) are usually covered by up to 50% of your home’s insured value. That means if your home is insured for $300,000, you have $150,000 in personal property coverage.

With landlord insurance, personal property coverage typically isn’t included, but your insurance company may offer additional coverage for appliances and furnished property for an additional premium. Your tenants’ property is covered by renters insurance if they choose to get that protection.

As for loss-of-use coverage, this is merely a functional difference. With homeowners insurance, loss-of-use coverage pays for your additional living expenses if a covered peril causes you to flee your home and live somewhere else temporarily.

With landlord insurance, this coverage reimburses you for lost rental income if your home is damaged by a covered peril and undergoing repairs. This coverage is also known as loss-of-rent or fair rental value.

Homeowners insurance vs landlord insurance cost comparison

According to the Insurance Information Institute (III), a landlord policy will cost, on average, about 25% more than a standard homeowners insurance policy. As of 2015 (the latest data provided by the III), the average homeowners insurance premium was $1,173.

Need a landlord insurance policy but don’t know where to start? Look no further than Policygenius. We work with a number of top-rated carriers who offer long-term rental coverage, so you can be sure we’ll find you a policy that’s both comprehensive and affordable.

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