Are you considering renting out a property, or are you already a landlord?
You need to understand the difference between landlord insurance and homeowners insurance to protect your investment. Both types of insurance provide coverage, but they are made to serve different purposes and offer varying levels of protection. In this article, we'll explore the key differences between landlord insurance and homeowners insurance, helping you to make the best decision about the type of coverage that best suits your needs. Understanding these distinctions can help you safeguard your property and financial interests.
What is Homeowner insurance?
Homeowners insurance is a policy taken out by individuals who own their homes and live in them. This insurance is usually designed to protect the home and personal property of the insured. It commonly includes dwelling coverage, which protects the actual structure of the home, personal property coverage for belongings within the house, liability coverage for legal issues, and additional living expenses coverage.
Primary Features of Homeowners Insurance
1. Dwelling Coverage: This feature covers damage to the main structure of the home. This encompasses elements such as walls, roof, or flooring, which may be damaged due to covered perils like fire, wind, or hail.
2. Personal Property Coverage: This aspect provides protection for the personal belongings within the home in case they are stolen or damaged.
3. Liability Coverage: This protects against legal costs if someone is injured on the property and decides to sue.
4. Additional Living Expenses Coverage: If a covered peril renders the house inhabitable, this feature covers the costs of living elsewhere temporarily.
What is Landlord insurance?
Landlord insurance is a type of insurance that provides coverage for property owners who are renting out one or more residential properties. It typically includes coverage for the physical building or structure, liability protection, and loss of rental income. This type of insurance is important for landlords to protect their investments and mitigate potential financial risks associated with renting out property.
Primary Features of Landlord Insurance
1. Dwelling Coverage: This aspect covers damage to the rental property itself caused by covered events, like fire, windstorm, or lightning.
2. Landlord Contents Coverage: This aspect covers items that belong to the landlord but are left at the rented property for use by the tenant. Such items may include appliances or furniture.
3. Liability Coverage: This protects the landlord in case a tenant or visitor is injured on the property and decides to pursue legal action.
4. Loss of Income Coverage: This feature provides compensation for lost rental income if a covered peril makes the rental unit uninhabitable.
Landlord Insurance vs Homeowner Insurance: Core Differences
Having dissected both landlord insurance and homeowners insurance separately, it is crucial to understand the specific distinctions between both policies.
1. Purpose of Property: Homeowner insurance applies when the owner occupies the property, while landlord insurance is suitable when the owner rents the property out to tenants.
2. Personal Property Coverage: While both insurances cover personal property, homeowners insurance offers extensive coverage, while landlord insurance only covers those belongings left for tenant use.
3. Liability Coverage: The scope of liability coverage under homeowners insurance is generally more extensive than under landlord insurance. Landlord insurance focuses on liabilities likely to arise from tenant-landlord relationships.
4. Additional Coverages: Homeowners insurance provides additional living expenses coverage if the house becomes unlivable. In contrast, landlord insurance offers loss of income coverage if the rental unit becomes uninhabitable from a covered peril, compensating for lost rent.
5. Cost: Generally, landlord insurance is more expensive than homeowners insurance, due to the higher risk assumed with tenants.
Types of home insurance policy
There are several types of home insurance policies, including:
1. HO-1: A basic form of homeowners insurance that provides coverage for specific named perils.
2. HO-2: Broad-form homeowners insurance that offers coverage for more perils than HO-1.
3. HO-3: Special form homeowners insurance, which is the most common type and provides coverage for the home's structure and personal belongings, except for specific exclusions.
4. HO-4: Renter's insurance, designed for tenants and provides coverage for personal belongings and liability.
5. HO-5: Comprehensive form homeowners insurance that offers extensive coverage for both the home's structure and personal belongings.
6. HO-6: Condo insurance is meant for condominium owners and provides coverage for personal property, liability, and the interior of the unit.
7. HO-7: Mobile home insurance, specifically designed for mobile or manufactured homes.
8. HO-8: Policy for older homes, providing modified coverage for historic or older homes.
Types of Landlord Insurance Policy
Landlord insurance policies typically include several types of coverage, such as:
1. Dwelling coverage: This covers damage to the rental property itself caused by covered events, such as fire, windstorm, or lightning.
2. Landlord contents coverage: This covers items that belong to the landlord but are left at the rented property for use by the tenant, such as appliances or furniture.
3. Liability coverage: This protects the landlord in case his tenant or visitor is injured on his property and decides to take legal action.
4. Loss of income coverage: This feature provides compensation for lost rental income if a covered peril makes the rental unit uninhabitable.
Is landlord insurance more expensive?
Yes, landlord insurance is more expensive than homeowners insurance due to the higher risk assumed by tenants. Unlike homeowner insurance, landlord insurance protects property owners from financial risks associated with renting a property.
Do I need homeowners and landlord insurance as a landlord?
As a homeowner who also rents out a property, you may need both homeowners insurance and landlord insurance. Homeowners insurance would cover your primary residence, providing protection for your home, personal property, liability, and additional living expenses. On the other hand, landlord insurance covers the property you are renting out, offering protection for the structure of the rental property, the landlord's belongings left for tenant use, liability, and loss of rental income in case the property becomes uninhabitable.
It's important to have both types of insurance to make sure that all your properties are adequately protected based on their specific uses.
Who pays home insurance when renting
When renting a property, the responsibility for purchasing home insurance falls on the homeowner, not the tenant. The homeowner's insurance policy covers the structure of the home, personal property, liability, and additional living expenses. As a tenant, you may want to consider purchasing renter's insurance to protect your personal belongings and provide liability coverage for yourself.
Who is the best landlord insurance?
Some well-known and reputable landlord insurance companies include State Farm, Allstate, Farmers, and Liberty Mutual. You can compare quotes and coverage options from multiple insurance providers to find the best landlord insurance that suits your individual requirements.
Which area is not protected by most homeowners insurance?
Homeowners insurance policies do not cover damage caused by floods and earthquakes. If you live in an area prone to these natural disasters, you would need to purchase separate flood insurance and earthquake insurance to ensure your property is fully protected.
Summary on Landlord Insurance Vs Homeowners Insurance
Landlord insurance and homeowners insurance serve different purposes. Landlord insurance provides coverage for rental properties, protecting you from financial loss when damage takes place. On the other hand, homeowners insurance is designed to protect owner-occupied homes, providing coverage for the structure, personal belongings, and liability. Understanding the distinctions between the two will help you make the best decision as a landlord or tenant.