Jul 14, 2021

Landlord vs. Homeowners Insurance: Which Insurance Is Right for You?


Do you really need landlord insurance?

You already have a homeowners policy that’s worked great for your home.

So, it should provide enough coverage for your rental, right?

Unfortunately, it won’t.

A homeowner’s policy won’t cover a home you don’t live in. If you only have a homeowners policy to protect your rental property, you will have to pay for any damages that would normally be covered by a home policy.

In this post, we’ll cover the difference between homeowners and landlord insurance. And, how to know which is right for you. To start, let’s look at the similarities of both policies.

How are landlord and homeowners insurance similar?

For this comparison, we’re going to look at HO3 (homeowner) and DP3 (landlord) policies. HO3 is the most common homeowners insurance policy. It is an open peril/risk policy. So, your property is protected from most damage, except for any perils explicitly excluded in your policy.

DP3 is also an open peril/risk policy. Some common exclusions for DP3 policies are earth movement, flood, power failure, mold, neglect, and government action. But, always refer to your exclusions specific policy for all exclusions. 

Both HO3 and DP3 policies cover the residence. And, they can cover any other structures on the property. Plus, both policies can cover personal items, loss of use, and personal liability.

Now that you know how they’re similar, let’s move on to how they differ.

How are homeowners and landlord insurance different?

Both HO3 and DP3 policies offer similar coverage. However, what coverage is standard and what risks each policy protects against are different. Here’s a look at these differences:

Coverage Homeowners (HO3) Landlord (DP3)
A - Building Covers the building and all attached structures Covers the building and all attached structures
B - Other Structures Covers other buildings on the property not attached to the main structure. May need to be endorsed* Covers other buildings on the property not attached to the main structure.
C - Personal Property Household belongings like furniture and clothing. Some items like electronics may have limited coverage May need to be endorsed* Some policies may include coverage for appliances or a lawnmower, for example. Tenants should have renters insurance policy to cover their items and liability.
D - Loss of Use Coverage for living elsewhere when home is not livable. May need to be endorsed* Called Loss of Rents. Recover lost rent while property is not rentable due to a covered claim.
E - Personal Liability Covers accidental property damage or bodily injury that you are liable for. $1,000,000 in liability coverage is common for a landlord. Tenants should have renters insurance for extra liability protection.
F - Medical Payments Covers guests’ medical bills if they are injured on property. Not included.

*Ask your insurance provider or review your policy documents to confirm your coverage and limits.

Landlord insurance is designed to protect a property you don’t live in. So, DP3 policies usually cover the residence and can cover other structures on the property.

Unlike HO3 policies, DP3 policies generally don’t cover personal property. However, DP3 policies can cover items you leave on the property – like appliances or a lawnmower. So, your tenants need rental insurance to cover their items.

Landlord insurance can also offer loss of rent coverage. If tenants can’t live on your property due to a covered claim, this insurance could cover your lost rent. That way, you don’t have to worry about making up for rent while doing repairs.

Another difference between HO3 and DP3 policies is liability protection. HO3 policies generally have standard liability protection. But, it doesn’t extend to business activities – like renting out your property.

With DP3, you need to add liability protection. This protection covers business-related liability. For landlords, $1,000.000 in liability coverage is recommended. This protects you if tenants injure themselves on your property due to your negligence. So, you’re not on the hook for their medical and legal expenses.

One last difference between HO3 and DP3 policies is cost. Landlord insurance generally costs 15-20% more than homeowners insurance. That’s because insuring renters is more risky. Renters cause more damage and claims than homeowners, which is most costly for your insurance company.

Is landlord insurance right for me?

If you’re renting a property, landlord insurance is probably the right choice. HO3 and DP3 policies have similar core offerings. A major difference is that HO3 policies cover a home you live in. And, DP3 policies cover a home you rent out.

So, if you rent out your property, a homeowners policy likely won’t cover it. That means you need landlord insurance to be protected in the event of damage to your property. Or, if you’re liable for tenant injuries.

The exception to this is if you rent out part of your primary residence. If you rent out a room or your basement, landlord insurance usually won’t cover you. In that case, you should get a comprehensive homeowners policy instead.

Protect yourself and your investment today by getting your landlord insurance quote from Obie.