How Much More Is Landlord Insurance Than Homeowners?

Property insurance for residential dwellings varies significantly based on how the property is used, whether it is owner-occupied or rented out. The type of insurance needed changes when a home transitions from a personal residence to a rental property, impacting both coverage and costs. This article compares homeowners and landlord insurance policies.

Homeowners Insurance Coverage

A standard homeowners insurance policy provides financial protection for the owner-occupied residence and its contents. This coverage includes the dwelling structure itself, protecting against damage from events such as fire, windstorms, and vandalism, and also extends to other structures on the property, like detached garages or sheds. Homeowners insurance further covers personal belongings within the home, such as furniture, clothing, and electronics, against theft or damage. Another component is liability protection, which helps cover medical bills or legal expenses if someone is injured on the property and the homeowner is found responsible. Additionally, if a covered event makes the home uninhabitable, the policy can cover additional living expenses, such as hotel stays and meals, while repairs are underway.

Landlord Insurance Coverage

Landlord insurance, also known as rental property insurance or a dwelling fire policy, is designed for properties rented out to others. This policy primarily covers the physical structure of the rental property, including the main dwelling and other structures like detached garages or fences, against damage from perils such as fire, lightning, or severe weather. It also includes liability coverage, protecting the landlord if a tenant or visitor is injured on the property and the landlord is held responsible for medical or legal costs.

A distinct feature is coverage for loss of rental income. If the property becomes uninhabitable due to a covered event, this coverage reimburses the landlord for rent that would have been collected during the repair period. It does not cover the tenant’s personal belongings; tenants must secure their own renters insurance. Some policies may also cover landlord-owned equipment kept on the property for maintenance, such as lawnmowers.

Key Differences in Risk and Coverage Affecting Cost

Landlord insurance is generally more expensive than homeowners insurance due to the differing risk profiles of owner-occupied versus tenant-occupied properties. When a property is rented, the owner is not present daily to monitor and mitigate potential issues, which can lead to increased risks of damage or accidents. This absence contributes to insurers perceiving rental properties as having a higher potential for claims. Increased liability exposure is another significant factor. Landlords face broader liability risks, including potential injuries to tenants or their guests, or property damage caused by tenant negligence. Landlord policies often include expanded liability protection to address these scenarios, leading to higher premiums. Furthermore, the inclusion of “loss of rent” coverage, which compensates for lost income if the property is uninhabitable, adds a layer of protection not typically found in homeowners policies, further contributing to the increased cost.

Determining the Cost Difference

The cost difference between landlord and homeowners insurance varies based on several factors unique to each property and policy. Property location, including local crime rates and proximity to natural disaster zones, significantly influences premiums for both types of insurance. The age and construction materials of the property also play a role, as older homes or those with certain materials may be considered riskier and more expensive to repair. Specific coverages chosen, the deductible amount, and the landlord’s claims history are additional factors that impact the final premium. Landlord insurance typically costs approximately 15% to 25% more than a homeowners insurance policy for a comparable property. To determine precise costs, property owners should obtain quotes for both homeowners and landlord policies from various insurers.