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 1600Kara McGinley

By

Pat Howard

Pat Howard

Managing Editor & Licensed Home Insurance Expert

Pat Howard is a managing editor and licensed home insurance expert at Policygenius, where he specializes in homeowners insurance. His work and expertise has been featured in MarketWatch, Real Simple, Fox Business, VentureBeat, This Old House, Investopedia, Fatherly, Lifehacker, Better Homes & Garden, Property Casualty 360, and elsewhere.

&Kara McGinley

Kara McGinley

Senior Editor & Licensed Home Insurance Expert

Kara McGinley is a senior editor and licensed home insurance expert at Policygenius, where she writes about homeowners and renters insurance. As a journalist and as an insurance expert, her work and insights have been featured in Kiplinger, Lifehacker, MSN, WRAL.com, and elsewhere.

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Homeowners insurance doesn’t just cover your home, but also your personal property, legal and medical payments if someone’s injured at your home and you’re found liable, and medical payments of others regardless of who’s at fault.

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 — also known as rental property insurance — comes in.

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Landlord insurance 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.

Homeowners insurance vs. landlord insurance

A standard landlord policy has many similarities to a standard homeowners insurance policy, but there are a few key differences.

Coverage

What does it cover?

Homeowners insurance

Landlord insurance

Dwelling coverage

Covers the home’s structure

Included

Covers the home’s structure

Other structures coverage

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

Included

Covers structures on your property that aren't attached to the home

Personal property coverage

Covers stuff inside and outside of the home, like furniture, clothing, electronics, and patio furniture

Included up to 50% of the home's insured value

Not included. But coverage for appliances and furnishings can be added to the policy for an additional premium.

Loss-of-use coverage

Covers additional living expenses, like a hotel stay, if you home needs extensive repairs

Included

Not included

Loss-of-rent coverage

Reimburses you for loss of rental income if your home needs extensive repairs and your tenants have to temporarily move out

Not included

Included

Personal liability coverage

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

Included

Included, but consider raising coverage limits

Medical payments coverage

Covers guests’ medical bills if they’re injured on your property

Included

Included

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Key differences between landlord and homeowners insurance, explained

The key differences between the two policies are the personal property coverages and loss-of-use vs. loss-of-rent coverages. 

Personal property coverage

Homeowners insurance covers personal property like clothes, furniture, and electronics 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. However, your insurance company may offer optional coverage for appliances and furnished property for an extra fee. 

Loss-of-use and loss-of-rent coverage

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. 

But 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 fair rental value.

Landlord insurance does not cover tenant’s belongings

Landlord insurance does not include coverage for your tenant’s belongings. They’ll need their own renters insurance policy if they want to protect their stuff. 

Is landlord insurance more expensive than homeowners insurance?

A landlord policy costs on average 25% more than a standard homeowners insurance policy, according to the Insurance Information Institute (III). [1]

With the average cost of homeowners insurance around $1,899 a year, that would bring the cost of landlord insurance to around $1,561 per year, according to our analysis of 2022 homeowners insurance rates across the county.

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.

Just click on our calculator, answer a few questions about yourself and your property, and a licensed Policygenius agent will be in touch to help you compare your options and buy a policy. They’ll even handle all of the paperwork for you!

3 types of landlord insurance

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

1. DP-1 policies

Dwelling-fire form 1 (DP-1) is the most basic option for landlords. As a named peril policy, you’re only covered from 10 perils listed in the policy. 

These types of policies are actual cash value (ACV) policies. This means if the home is damaged, you’re only reimbursed for the depreciated rebuild value of the property. 

Although this is the cheapest of the bunch, a DP-1 is far and away the least popular insurance option for landlords, and should be avoided if you can.

2. DP-2 policies

Dwelling-fire form 2 (DP-2) offers slightly more comprehensive coverage than a DP-1 policy. It offers coverage against 16 perils instead of just 10, and replacement cost value (RCV) coverage for your property. This means if your tenants burn your building down, depreciation isn’t factored into the building’s rebuild cost. 

With RCV coverage, 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-2 policies 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. 

Just keep in mind that a DP-2 policy typically won’t cover your property if it’s been vacant for more than 30 days.

3. DP-3 policies

Dwelling-fire form 3 (DP-3) is the most common and comprehensive type of landlord insurance policy on the market. These types of policies 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 a DP-3 policy, your home is also protected with RCV and loss-of-rent coverage.

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References

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Policygenius uses external sources, including government data, industry studies, and reputable news organizations to supplement proprietary marketplace data and internal expertise. Learn more about how we use and vet external sources as part of our

editorial standards.
  1. Insurance Information Institute

    . "

    Coverage for renting out your home

    ." Accessed December 14, 2021.

Authors

Managing Editor & Licensed Home Insurance Expert

Pat Howard

Managing Editor & Licensed Home Insurance Expert

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Pat Howard is a managing editor and licensed home insurance expert at Policygenius, where he specializes in homeowners insurance. His work and expertise has been featured in MarketWatch, Real Simple, Fox Business, VentureBeat, This Old House, Investopedia, Fatherly, Lifehacker, Better Homes & Garden, Property Casualty 360, and elsewhere.

Senior Editor & Licensed Home Insurance Expert

Kara McGinley

Senior Editor & Licensed Home Insurance Expert

gray linkedin icon link

Kara McGinley is a senior editor and licensed home insurance expert at Policygenius, where she writes about homeowners and renters insurance. As a journalist and as an insurance expert, her work and insights have been featured in Kiplinger, Lifehacker, MSN, WRAL.com, and elsewhere.

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