Coverage of Landlord Insurance vs. Homeowners Insurance

When it comes to protecting your property, understanding the difference between landlord insurance and a homeowner policy is important. They both offer property protection, but cater to different needs. Homeowners insurance covers personal belongings and liability, while landlord insurance addresses the specific risks associated with rental properties.

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What Is Landlord Insurance?

Unlike a standard homeowner policy, which primarily covers owner-occupied residences, landlord insurance addresses the risks associated with rental properties, such as loss of rental income, liability for tenant-related incidents and coverage for damages like fires, storms or water damage.

How It Works

One of the key features of landlord insurance is its provision for loss of rental income. If a covered event renders the property uninhabitable, this insurance can compensate the landlord for lost rental payments during the repair period.

Additionally, landlord insurance often includes liability protection, which covers legal and medical expenses if a tenant or visitor is injured on the property. Landlord insurance policies can also be customized to include coverage that protects against tenant damage, vandalism and pays legal fees for an eviction .

What Is Homeowners Insurance?

Homeowners insurance protects individuals who reside in their own homes and covers the structure of the home itself, personal belongings and liability for accidents. This insurance can also cover additional living expenses if the home becomes uninhabitable due to a fire or severe storm.

How It Works

The coverage provided by homeowners insurance generally includes protection against a range of risks, such as theft, vandalism and certain natural disasters. However, standard policies often exclude specific events like floods or earthquakes, which may require separate coverage.

When a covered event occurs, the homeowner can file a claim with their insurance provider. The insurer will then assess the damage and determine the compensation based on the policy terms. Deductibles , which are the out-of-pocket costs the homeowner must pay before insurance kicks in, may require hundreds or thousands of dollars depending on the terms in the policy.

Landlord Insurance vs. Homeowners Insurance Key Differences

When considering coverage for your property, here are six key differences you should keep in mind:

• Coverage scope : Homeowners insurance typically covers the structure of the home, personal belongings and liability for accidents. Landlord insurance focuses on the rental property and any personal property used to service the rental, like appliances.
• Personal property protection : Homeowners policies often include coverage for personal items such as furniture, electronics, and clothing. Landlord insurance generally does not cover the personal belongings of tenants.
• Liability coverage : Homeowners insurance provides liability protection for incidents that occur on the property, such as a guest getting injured. Landlord insurance offers liability coverage specifically related to tenant injuries or legal issues.
• Loss of use vs. loss of rental income : Homeowners insurance may cover additional living expenses if the home is uninhabitable while landlord insurance may compensate the landlord for lost rental income if tenants cannot occupy a building under repair.
• Tenant-related risks : Homeowners insurance is designed for owner-occupied properties, but landlord insurance addresses risks associated with renting, such as tenant damage or eviction costs.
• Cost : Homeowners insurance premiums are generally based on the value of the home and personal belongings, as well as the location and risk factors. Landlord insurance premiums may be higher due to the additional risks associated with rental properties, such as tenant turnover, which makes tenant screening an important step in managing rates.

Which Policy Is Right for You?

If you lease to tenants, landlord insurance provides the necessary coverage for rental-related risks while homeowner's is what protects your primary residence.

But what type of insurance do you need if you offer your primary residence from time to time as a short-term rental? Determining the right policy for short-term rental insurance involves understanding the specific coverage needs of your property.

If you rent out your home occasionally while still living there, a homeowners insurance policy might suffice, as it typically covers personal belongings and liability. However, it’s crucial to check with your insurer, as some policies may not cover short-term rental activities. An accredited advisor in insurance (AAI) can also provide additional insights for anyone with specific insurance needs.

Bottom Line

Property owners should pay close attention to the distinctions between landlord insurance vs a homeowner policy as there are many nuanced scenarios to consider regarding damages, liability and cost. In general, anyone who leases to tenants needs both landlord insurance for their rentals and homeowner's insurance for where they live. Some hybrid landlords who do short-term rentals may need to work out very specific coverage terms with an agent, but those fees are a common rental property tax deduction .

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