Landlord vs Homeowners Insurance - What's the Difference?

Landlord vs Homeowners Insurance - What's the Difference?

If you’re a new landlord, you may have questions about landlord insurance (also known as investment property insurance) and how it differs from homeowners insurance. Do you need landlord insurance if you rent out a few rooms in a house you occupy? Is landlord insurance a substitute for homeowners insurance or do you need both types of coverage? Most importantly, how does each insurance policy protect you from unforeseen circumstances?

Homeowners Insurance Covers You & Your Home

True to its name, homeowners insurance is designed to protect you, the homeowner, in your primary residence. Homeowners insurance provides structural damage coverage in the event of strong winds, hail storms, house fires, and vandalism, with the ability to purchase additional coverage for floods and other risks. Some policies include “loss-of-use” coverage, providing a temporary allowance for lodging and meals if your home is damaged by a qualifying event and deemed unlivable. A homeowners insurance policy may cover your personal property or give you the option to add this coverage. 

The takeaway?

  • If you live in a home and don’t rent it out, purchase homeowners insurance. 
  • If you have investment properties that you rent out (separate from your primary residence), you need landlord insurance for these properties and homeowners insurance for your primary residence.
  • If you rent an owner-occupied property, check with your insurance provider on whether you need homeowners insurance or landlord insurance (keep reading for more information on this situation)

Landlord Insurance Covers You + Tenant-Related Risks

Like homeowners insurance, landlord insurance provides coverage for the property in the event of weather-related structural damage and vandalism. The primary difference is that landlord insurance also provides liability protection and covers risks associated with tenants. For example, landlord insurance may include loss-of-rent coverage for you in the event the tenant needs to leave the property due to it becoming uninhabitable from a qualifying event. If the tenant causes damage to the home, landlord insurance may provide coverage for repairs, and some policies provide coverage in the event a tenant stops paying rent.

Does Landlord Insurance Protect Tenants’ Personal Property?

Landlord insurance doesn’t include coverage for a tenant’s private property, although it may cover furnishings and appliances that are part of the property and belong to the landlord (for example, a refrigerator). To cover a tenant’s private property, you or the tenant should look into renters insurance.

If I Live in a Multi-Family Home or Rent Rooms in my Home, Do I Need Landlord Insurance or Homeowners Insurance? 

Check with your insurance provider to see if an owner-occupied home qualifies as a rental. Different insurance companies have different determinants, such as the relationship between the parties (family vs non-family) and whether the dwelling has separate entrances. 

If you live in one unit of a multi-family home, your homeowners insurance may include the ability to add riders that cover risks related to tenants. The length of their stay (short-term vs long-term) is one factor that an insurance company may use to determine whether you need homeowners insurance or landlord insurance.

Can I Purchase Landlord Insurance if I’m Already Renting?

Yes. It’s safest to purchase landlord insurance prior to renting out a house or rooms in your qualifying home, but you can switch from homeowners insurance to landlord insurance at any time. There’s no need to wait for the lease to end. Call insurance companies today, and request quotes to compare.

Renters Insurance Covers Tenants 

Renters insurance is for tenants and covers their private property in the event of damage or loss. These policies provide liability protection for tenants (such as if a guest of the tenant is injured on the property and the tenant bears some responsibility). In the event the house is damaged by a qualifying event and the tenant must leave the property, renters insurance provides temporary housing assistance for the tenant.

The average cost for renters insurance ranges from $125-$374 per year depending on the state. 

You may make renters insurance a requirement for tenants to purchase and maintain as part of their lease agreement with you. 

Protect Yourself with the Right Insurance Policies

In 2020, the arrival of Covid-19 took the world by surprise and produced unforeseen financial difficulties for property owners and tenants. Landlords with policies that covered loss-of-rent were thankful for them. That same year, 31.8 million Americans experienced an unintentional home injury. Between pest infestations, storm damage, pipe breaks, and a growing number of renters who don’t believe landlords should exist (and may not pay or treat your property as kind), it’s essential to have the right insurance policies in place to limit liability, protect your investment property, and make life less stressful during times of hardship.

It’s not homeowners insurance vs landlord insurance; it’s how landlord insurance and homeowners insurance protect you and which you need depending on the type of properties you own and where you reside.

Questions? Call insurance providers and take the first step to ensuring you have the coverage you need. At WILMOTH Group, we are happy to lead you in the right direction if you need recommendations.

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WILMOTH Group is headquartered in Indianapolis, Indiana and Fort Myers, Florida. We focus on providing creative local solutions for a variety of residential real estate needs including, properties for sale, property management services in Indianapolis, and short-term management services in Tampa and Fort Myers.