Landlord Insurance vs. Homeowners Insurance: Key Differences to Know

When you own a home, you need to have insurance. But what is the right policy to have? A landlord insurance policy or a homeowners insurance policy. The difference lies in how the home is occupied. Here are some key differences between a landlord insurance policy and a homeowners insurance policy. 

Understanding Insurance Basics

Property owners need to get the right type of insurance to properly protect their homes. The wrong policy could mean that a claim gets denied.

What is Homeowners Insurance?

A homeowners insurance policy is a type of insurance that protects homeowners who are planning on occupying the home. It covers the structure, additional structures on the property, liability, personal property, and additional living expenses. Insurance companies will commonly cover perils such as fire, theft, water damage, and windstorm. 

What is Landlord Insurance?

A landlord insurance policy is a type of policy that protects homes that are rented out to third parties. While it covers the same things, such as dwelling, additional structures, landlord’s personal property on premises, and liability, it is considered a business policy and is generally more expensive than homeowners policies. The reason is insurance companies feel that tenants will not care for a property the same way a homeowner does and may have more claims. 

Key Differences Between Landlord Insurance and Homeowners Insurance

Let’s review some key differences between landlord insurance and homeowners insurance. 

Coverage Differences

The primary coverage of both policies is to cover the dwelling and structures of the property. The only difference is homeowners is owner-occupied while landlord insurance is occupied by tenants. Both policies will have liability coverage. 

The liability coverage in homeowners insurance protects homeowners from third-party claims of property damage or injury. The landlord policy will do the same. If a claim arises that is determined to be due to a lack of care of the property, the landlord will be responsible. This can occur if something like a tree branch falls on a neighbor’s property. 

Loss of income is something strictly held in a landlord insurance policy. If the home is uninhabitable due to a covered loss, the landlord will not be able to rent it. This covers their lost income. In a homeowners policy, the homeowners get additional living expenses to rent another property while their home is being fixed. This is only found on a homeowners policy. 

Policyholder Requirements

Policyholder requirements are determined by occupancy. A homeowners insurance policy must be owner-occupied for the policy to be valid. Landlord policies are for properties occupied by tenants (even if they are family and not paying rent). 

Premiums and Costs

While the two policies are similar in scope, the landlord insurance policy will be more expensive than a homeowners policy. On average, property owners should expect to pay 20% more in premiums for a landlord policy. 

Situations Where Each Type of Insurance is Appropriate

Let’s review the situations where you should consider each policy. 

When to Choose Homeowners Insurance

If you own the property and plan on living in it, then you need homeowners insurance. This is a standard policy that an insurance agent can help you get. 

When to Opt for Landlord Insurance

If you own the property and will have anyone else other than yourself living in it, you should get a landlord policy. Keep in mind that the policy doesn’t protect the tenants’ personal property or liabilities. You should encourage them to get a renters policy to protect themselves. 

Comparing Benefits and Limitations

It is important to understand both the benefits and limitations of each policy. 

Benefits of Homeowners Insurance

Homeowners insurance provides peace of mind to homeowners. It pays for damages and lost items in the event of fire, theft, windstorm, or water damage. Homeowners make a considerable investment in owning a home and should have a policy that will make them whole if there is a loss. 

Benefits of Landlord Insurance

It is the responsibility of the property owner to protect the structures of the home. Landlord insurance does just that while also providing key liability protection in the event that there is a third-party loss beyond their control. 

Limitations of Homeowners Insurance

You cannot have a homeowners insurance policy if you have tenants living in the property. If you do, this could be considered a fraudulent application and lead to a denial of claims for having the wrong insurance. Property owners should be very careful to get the right policy. 

Limitations of Landlord Insurance

It is important to know that landlord insurance does not protect tenants’ personal property in the home. This is why landlords should encourage tenants to get their own renters insurance policy to have the protection they need. 

FAQs

Common Questions About Homeowners Insurance

One of the most common questions about homeowners insurance is whether it covers you for liability if you are responsible for a loss. The answer is yes, but only to the limits of the policy. Policies default to $100,000 in coverage. Any loss over this amount is still the responsibility of the homeowner, and they can be held liable for the difference. 

Common Questions About Landlord Insurance

One of the most common questions about landlord insurance is whether it protects my assets on the property. The answer is yes, it does. While it doesn’t protect your tenants’ property, it does protect things like appliances and any furniture you may have on the property. Many policies default to $5,000 in coverage for landlord’s personal property. If you need more, talk to your insurance agent.