Homeowners Insurance vs. Landlord Insurance

Unlike homeowners insurance, landlord insurance will provide coverage for a property you are renting to someone else.
Written by Lynell Spencer
Reviewed by Melanie Reiff
Landlord insurance costs more than
homeowners insurance
, but it protects your rental property in important ways. If you and your family are living in your own, homeowners insurance is what you need to protect your investment. However, If you use your house (or even part of it) as a rental for others, you will need landlord insurance.
Also called Rental Property Insurance, landlord insurance makes sure that you are protected against the types of perils and liabilities that come with having a tenant in your home. This includes any loss of income you may face if you lose tenants. 
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Homeowners insurance vs. landlord insurance

Homeowners insurance is designed to protect your primary dwelling, other structures on your property, and your personal property. It also protects you when an injury occurs on your property where you may be liable. 
Landlord insurance goes beyond that to cover things like loss of income if your renter is forced to move out because of damage to the property. Here is a look at some of the major differences:
Coverage type
What is covered
Homeowners Insurance
Landlord Insurance
Dwelling (house)
Dwelling coverage protects the physical structure of the home
Other structures
Covers other buildings on the property like sheds, separate garages, and any other outbuildings
Personal property
Covers possessions like furniture, tools, appliances, clothing, and art
Included up to 50% of the home's insured value
Not included, but can be added for an additional cost
Loss of use
Helps cover living expenses like a hotel or rental if your home is destroyed or needs extensive repairs that require you to leave
Not included
Loss of rent
Covers the rental income lost if a tenant is required to move out due to loss or major damage
Not included
Personal liability
Covers accidents that cause injury or property damage that you may be liable for
Included (check to make sure standard coverage is enough)
Medical payments
Pays medical bills incurred by a guest who is injured on your property.

What are the most notable differences between homeowners and landlord insurance? 

Choosing homeowners or landlords insurance depends on how you use the home in question. If you are using it as a rental property, you will need landlords insurance. If you are living in the home, homeowners insurance will probably do. 
For circumstances that are less clear, like if you are renting out a room in your home, or using your home as a short term rental for an event, you should talk to your insurance agent. If you run a business from your home, you may need different coverage as well. 

Loss of use coverage vs loss of rent coverage

One major difference between homeowners and landlords insurance is in the loss-of-use and loss-of-rent coverage. 
Homeowners insurance policies include loss-of-use coverage, which protects you and helps to pay for alternative shelter if your home is damaged in a
named peril
so badly that you need to move out while it is repaired.
Conversely, landlord insurance includes loss-of-rent coverage, which reimburses you when a tenant needs to move out to repair covered damages. For instance, if you needed to rebuild the home after a fire, loss-of-rent coverage would reimburse you for the months that you could not rent out the property. 

Personal property coverage

While personal property coverage is offered in both types of policy, what is covered will differ.
Homeowners insurance offers standard coverage for all personal belongings damaged due to a named peril. Items are covered up to 50% of the insured value of your home
For example, imagine a windstorm causes a tree to fall and break through your window and directly onto your piano. Personal property coverage would pay to replace that piano—as long as windstorms are a named peril in your policy.
Landlord insurance, however, typically only covers personal items used to maintain the property, like tools, lawn care items, etc. If there are more items you need to cover, additional coverage can be purchased. As an example, if you rent a furnished home to your tenant, you will want to add full contents coverage to your landlord policy.
It is important to note that landlord insurance does not cover damage to your renter’s belongings. They will need to purchase
renters insurance
to protect their personal property from damage caused by a covered peril. 

Difference in cost between homeowners insurance and renters insurance

Both homeowners insurance and landlord insurance can increase your monthly spending, but you will pay an average of 25% more for landlord insurance. In part, this is because landlord insurance offers more liability coverage than homeowners insurance to account for the greater risk.
Additionally, there are fewer claims and damages when the owner lives in the home, since homeowners generally want to protect their investment and maintain the value of their property. 
Although it is more expensive, there are some discounts offered for landlords insurance that may help you save. 
This includes discounts for:
  • Upgrades to the structure of the home 
  • Choosing a higher deductible
  • Bundling your other policies with one carrier
Key Takeaway Landlord insurance costs more, but is necessary if you don’t want your claim denied. 

Which type of insurance is right for you? 

Policies and coverage vary by insurer and location. Even when you are certain about the type of insurance that you need, there are a number of coverage options.  

Homeowners insurance options

There are two main types of homeowners insurance coverage: replacement cost (RV) and actual cash value (ACV)
An actual cash value policy may save you money on your premium, but if you experience a covered loss, it may not cover the full cost of repair. This is because an ACV policy is based on the current market value of your home. Because it figures in depreciation, the older your home is, the less your policy will pay.
A replacement cost policy may be a better option. This type of coverage pays the current cost of repair or replacement from a covered loss, regardless of the age or cash value of your home. 
You can also choose to add an extended replacement cost coverage to your policy. This provides an extra layer of protection if you experience a natural disaster which can cause the cost of construction and materials to increase due to demand. . 

Landlord insurance options

Landlord policies have three basic types:
  • DP-1: Dwelling Fire Form 1 is the most basic policy available to landlords. While this is the cheapest coverage you can buy, it is an actual cash value (ACV) policy. This means that insurance will pay the value of your home minus depreciation. This could leave you with a hefty portion of repair costs out of pocket.
  • DP-2: Dwelling Fire Form 2 offers more protection for your rental property. Not only does it cover more types of perils, it pays according to the replacement cost value (RCV) of your property. This means that depreciation is not figured in, and insurance pays to repair the damage at the current market price.DP-2 policies also offer Loss-of-Rent insurance that will cover any monies lost while your damaged home is unrentable. 
  • DP-3: Dwelling Fire Form 3 is the most popular and the most comprehensive option for landlords. DC-3 is an open perils policy, which means all types of damage are covered unless explicitly stated in the policy. These policies offer RCV coverage and also cover loss-of-rent.
In addition to the various policy types, you will want to talk to your broker about how you are renting your home. Your coverage need will be different if you are house sharing with a tenant (like a roommate) vs. renting the property without living on the premises. The length of time you plan to rent out the house can also change the type of policy that you need. 
Key Takeaway There are different types of landlord policies, make sure you have all the coverage you need.

How to find affordable home insurance 

Looking for the right type and amount of
home insurance
coverage can be daunting, and finding out you have the wrong coverage after your home is damaged can be devastating. With so many options available, it’s easy to be overwhelmed. 
You can also save money on your premium by choosing a higher deductible, or by bundling/combining coverage of all your policies—like home, landlord, and auto—with one insurer. 
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Home insurance is cheaper. Landlord insurance is around 25% more expensive on average. The average price for home insurance is about $1249 per year, while landlord insurance is more like $1550.
Landlord insurance covers damage to your rental home and property. It protects you from liability if tenants are injured on your property, and provides for loss of rental income if your property is so damaged that you are unable to rent it out.
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