Difference Between Landlord Insurance and Homeowner Insurance

Renting out a vacant home can generate some significant additional income. However, it also means that you as a landlord are at the mercy of your tenants. If they fail to pay rent or smash a hole in the wall, you could be financially liable. As a property owner, the best you can do to ensure some decent state of mind is to purchase insurance policies meeting your needs.

Unbelievably high number of landlords is still convinced that the homeowner insurance is enough and will do the job if things with a tenant go wrong or an accident occurs. Well, it will not. Let’s explore both types of insurance policies to see the differences.

Homeowner’s Insurance

That is a kind of property insurance that covers losses or exterior/interior damages to the house or the personal belongings in the home. It may also provide liability coverage against accidents.

Landlord Insurance

The landlord insurance is a policy that protects the property owner from financial losses related to the rental properties. It is not legally binding, but it is highly recommended.

Neither of these insurance policies covers tenants’ belongings. Renters are supposed to obtain their own insurance policy against theft or any other damages they consider important.

Homeowner Insurance vs. Landlord Insurance

Homeowner insurance policies do not necessarily cover renting property, especially if the house is being rented on an ongoing basis. The insurance company chose to insure and protect you, the owner, and it does not know anything about third parties, i.e. tenants.

According to James J. Whittle, assistant general counsel and chief claims counsel for the American Insurance Association, landlord insurance is of utmost importance for anyone planning to rent some property to another individual.

Landlord insurance coverage depends on the location of the rented house/condominium/apartment, but in general, it will protect the rented-out property against severe weather conditions, natural disasters, vandalism. Depending on the insurance company, it may also cover the legal/medical expenses if someone gets injured inside of the property and tries to sue you as a landlord. It is not limited to the tenant only; it also applies to any visitors.

Unlike the homeowner insurance, the landlord insurance coverage may also include a loss of income protection. For instance, if the property is not available for renting out because of fire, flooding, etc., the landlord would receive the fair market value for rent while the house is being repaired. Some policies also include protection against tenants who do not pay rent on time or disappear suddenly without paying the due amounts.

The landlord insurance also includes any appliances or furniture you rent in the unit. In addition to that, it also covers maintenance items such as a lawn mower or a snow blower. Once again, it does not include the renter’s belongings.

As renting out a property is a business investment, the landlord insurance can be deducted on a tax return as a business expense. There are plenty of landlord policies on the insurance market. Each one has a different level of protection and comprehensiveness. The best you can do to protect your property is to choose the policy that meets your requirements and fits your needs.