If you rent out a home, your regular homeowners policy may not protect you. Most standard homeowners policies are designed for owner-occupied homes, and insurers may limit or deny coverage when a property is rented to tenants. Landlord insurance, sometimes called rental dwelling or dwelling fire insurance, is built for the risks rental owners face.
This guide explains the main parts of a landlord policy, the common policy types and how to shop for coverage. Policies and terminology vary by insurer and state, so read your actual policy documents and ask an agent about specifics.
This article is general information, not insurance or legal advice.
Why Homeowners Insurance Usually Is Not Enough
Homeowners insurance typically assumes you live in the home. When you rent it out:
- The insurer may treat the change in occupancy as a material change in risk.
- Personal property coverage for your belongings is less relevant, because the tenant’s belongings are not covered by your policy.
- You face risks a homeowner does not, such as lost rental income and liability claims from tenants or their guests.
Always tell your insurer when you start renting out a property. Failing to do so can put claims at risk.
What Landlord Insurance Typically Covers
Dwelling Coverage
Covers the structure of the rental, such as walls, roof, floors and built-in systems, against covered perils like fire, wind and certain types of water damage. Some policies also cover detached structures like garages and fences.
Liability Coverage
Helps pay for legal defense and damages if someone is injured on the property and you are found responsible, or if you are sued for certain types of property damage. Liability is one of the most important parts of a landlord policy.
Loss of Rental Income (Fair Rental Value)
If a covered loss makes the unit uninhabitable, this coverage can replace lost rent while repairs are made. This can be crucial if you rely on rent to pay the mortgage.
Landlord-Owned Personal Property
Covers items you own and provide for tenants or for maintenance, such as appliances, a lawn mower or furniture in a furnished rental, depending on the policy.
Optional Coverages
Depending on the insurer, you may be able to add:
- Water backup from sewers or drains
- Equipment breakdown for systems like HVAC
- Ordinance or law coverage for the cost of bringing repairs up to current building codes
- Vandalism and malicious mischief if not included by default
- Rent guarantee coverage, offered by some insurers or third parties, for nonpayment by tenants
Common Policy Types: DP-1, DP-2 and DP-3
Many landlord policies in the United States are based on standard dwelling forms:
| Form | Coverage basis | Typical claim payment |
|---|---|---|
| DP-1 (basic) | Named perils only, a limited list | Often actual cash value |
| DP-2 (broad) | Named perils, a broader list | Often replacement cost for the dwelling |
| DP-3 (special) | Open perils for the dwelling, except listed exclusions | Often replacement cost for the dwelling |
Actual cash value pays the depreciated value of damaged property, while replacement cost pays the cost to repair or replace without deducting depreciation, subject to policy terms. DP-3 policies are commonly chosen for rentals because of broader coverage, but they generally cost more. Check exactly how your policy defines coverage.
What Landlord Insurance Usually Does Not Cover
- Tenant belongings. Tenants need their own renters insurance.
- Floods. Standard policies generally exclude flood damage. Flood coverage is available through the National Flood Insurance Program and private insurers.
- Earthquakes. Usually require separate coverage.
- Wear and tear and lack of maintenance.
- Pest damage such as termites in most cases.
- Intentional damage by you.
Read the exclusions section of any policy carefully.
Umbrella Insurance
A personal or commercial umbrella policy adds liability coverage above the limits of your landlord and auto policies. Many landlords consider umbrella coverage as their portfolio grows, since a serious injury claim can exceed standard liability limits. Confirm that the umbrella covers your rental properties.
Should You Require Renters Insurance?
Many landlords require tenants to carry renters insurance, which covers the tenant’s belongings and provides liability coverage for the tenant. Benefits include:
- Tenants have protection for their own property, reducing pressure on you after a loss.
- Tenant liability coverage may respond to damage the tenant causes, such as an accidental kitchen fire.
- Some policies can list you as an interested party so you are notified if coverage lapses.
Check whether local law restricts requiring renters insurance, and put the requirement in your lease.
Short-Term Rentals Are Different
If you rent on a short-term basis through vacation rental platforms, standard landlord policies may not apply. Look for coverage designed for short-term rentals and read the platform’s host protection terms carefully.
How to Shop for Landlord Insurance
Step 1: Gather Property Details
Insurers will ask about the property’s age, construction, roof age, systems (electrical, plumbing, HVAC), occupancy and safety features.
Step 2: Choose Coverage Amounts
- Dwelling: Based on the cost to rebuild, which may differ from the market value.
- Liability: Consider your assets and risk tolerance.
- Loss of rent: Enough to cover several months of rent, depending on how long repairs might take.
Step 3: Compare Multiple Quotes
Get quotes from several insurers or work with an independent agent who can compare carriers. Compare coverage, not just price.
Step 4: Ask About Discounts
Common discounts can include bundling, safety devices, newer roofs and claims-free history.
Step 5: Review Deductibles
A higher deductible lowers the premium, but make sure you can pay it after a loss.
Step 6: Review Annually
Update coverage when you renovate, rents change or rebuild costs rise.
Tips to Lower Risk and Premiums
- Keep up with preventive maintenance
- Install and test smoke and carbon monoxide alarms
- Fix trip hazards and loose railings promptly
- Keep records of repairs and upgrades
- Screen tenants consistently and fairly
Frequently Asked Questions
Is landlord insurance required?
No federal law requires it, but mortgage lenders typically require insurance on the property, and many require coverage appropriate for a rental.
Is landlord insurance more expensive than homeowners insurance?
It often is, because rental properties carry different risks and include coverages like loss of rent. Costs vary by property, location and coverage.
Does landlord insurance cover tenant damage?
It may cover sudden accidental damage, depending on the policy, but often excludes intentional damage or wear and tear. Ask your insurer how tenant-caused damage is handled.
Do I need a separate policy for each rental?
Some insurers offer policies covering multiple properties. Ask about portfolio options if you own several units.
Should I form an LLC instead of buying more insurance?
An LLC and insurance serve different purposes, and an LLC does not replace insurance. Talk to an attorney and insurance professional about your situation.
The Bottom Line
Landlord insurance protects your rental structure, your liability and your rental income. Tell your insurer the property is rented, understand the difference between policy forms, consider loss of rent and umbrella coverage, require renters insurance where allowed and compare quotes on coverage rather than price alone. Review your policy every year as your property and portfolio change.
This article is general information, not insurance, legal or financial advice.
Editorial note: Rent Roostly is independent and reader-supported. This guide is based on research into manufacturer documentation, published specifications and widely accepted best practices; we have not been paid to mention any product. If we add affiliate links in the future, they will be clearly disclosed per our Affiliate Disclosure.