Landlord insurance covers the building you rent out, your liability as its owner and the rent you lose after a covered loss. It does not cover your tenant's belongings. Insurers estimate that it costs about 25% more than a homeowners policy on the same house.
Key takeaways
- A homeowners policy stops fitting the day a tenant moves in: tell your insurer before the lease starts.
- The usual policy is a DP-3: the building is covered against every cause of loss the policy does not exclude.
- Your tenant's belongings are never covered. That is what renters insurance is for.
- Flood, earthquake and unpaid rent need their own cover.
What landlord insurance is
A homeowners policy is written for a home you live in. When a tenant moves in, the risks change: you are no longer there to notice a leak, and someone else's guests use your stairs. Landlord insurance, also called a dwelling fire policy, is written for that situation.
Insurers sell it in three forms:
- DP-1 covers a short list of causes, such as fire and lightning, and often pays the depreciated value.
- DP-2 covers a longer list of named causes.
- DP-3 covers the building against every cause of loss the policy does not exclude. It is the form most owners of a rental house buy.
What it covers
| Cover | What it pays for |
|---|---|
| The dwelling | Repairing or rebuilding the house after a covered loss: fire, storm, a burst pipe. |
| Other structures | A detached garage, a fence, a shed. |
| Your property on site | What you own and leave in the rental: appliances, furniture in a furnished unit. |
| Liability | Medical and legal costs when a tenant or a visitor is hurt and you are held responsible. |
| Loss of rent | The rent you stop receiving while the home cannot be lived in after a covered loss. |
Liability and loss of rent are included in most policies, but not in all of them, and the default limits can be low. Read both lines before you compare prices.
What it leaves out
- Your tenant's belongings. A landlord policy never covers them.
- Flood and earthquake. Each needs its own policy.
- Wear and tear. An old roof that fails is maintenance, not a claim.
- Rent a tenant does not pay. Loss of rent applies after a covered loss. Unpaid rent is another product, often called a rent guarantee.
- A long vacancy. Many policies reduce the cover when the home has been empty for 30 or 60 days.
What it costs
Insurers estimate that a landlord policy costs about 25% more than a homeowners policy on the same house. The premium moves with:
- where the home is, and how exposed it is to storms, fire or theft;
- its age, its roof and how it is built;
- the limits you choose for liability and loss of rent;
- your deductible, and the claims already made on the property.
Ask for three quotes with the same limits and the same deductible. Two quotes with different limits cannot be compared.
If you rent short term
A standard landlord policy is written for a tenant who stays for months. Many exclude stays of a few nights. If you rent on Airbnb, ask for a policy or an added clause written for short-term rentals, and read what the platform's own protection leaves out.
If a property manager runs the rental
Most management agreements ask you to add the manager to your policy as an additional insured. It costs little and protects both of you when a claim names the two parties. Check the liability limit the agreement asks for before you sign: it is sometimes higher than the default limit of your policy. A property manager can also handle the claim with the insurer for you. Ask whether that is inside the monthly fee.
Frequently asked questions
Is landlord insurance required by law?
No state requires it. A lender does: if the rental has a mortgage, the loan asks for a policy that matches how the home is used.
Does landlord insurance cover damage caused by a tenant?
It usually covers sudden, accidental damage, such as a kitchen fire. Wear and tear is not covered, and intentional damage depends on the policy. The security deposit is the first resort.
Is landlord insurance tax deductible?
For a rental property, the premium is generally deductible as a rental expense. Check your own case with a tax adviser.
Do I need it if I rent out a room in my own home?
Tell your insurer. Some homeowners policies accept one lodger, others ask for an added clause, and none of them covers the lodger's belongings.