When renting out a residence, it’s important to have the right insurance in place before a tenant move in. Though homeowner's insurance and landlord insurance may seem similar, there are some critical differences....
The Biggest Difference Between Homeowner and Landlord Insurance:
Though coverage will vary by company, endorsements, and the policy itself, typically, the biggest difference between homeowner's insurance and a landlord's policy is that a homeowner's policy is for an owner-occupied residence. If a residence is not owner-occupied but insured on a homeowner's policy there will most likely be a coverage issue should a claim occur.
On the other hand, a landlord's policy, aka a dwelling fire policy, business owners policy (BOP), or commercial package policy, allows for tenant-occupied residency.
The reason why insurance companies are concerned about occupancy is that an owner is more likely to address a potential claim issue sooner than a renter resulting in fewer claims overall. Landlord insurance is typically more expensive than a homeowner's policy, as there is more risk for the insurer.
Homeowner's Insurance Overview:
To further understand the difference between homeowner's insurance and landlord insurance, let’s go over the basics of each policy. Again, coverage varies per carrier, endorsements and the policy itself, but here are three basics:
Dwelling Coverage: Typically protects the structure of the home including permanent fixtures
Liability Coverage: Normally protects against covered bodily injury or property damage claims caused by an insured
Personal Property Coverage: Normally covers family members’ personal belongings while a member of the household
Landlord Insurance Overview:
Each of the three main coverages can be taken in turn to show the fundamental differences between homeowner's insurance and landlord insurance policies.
Dwelling coverage: On a landlord policy, dwelling coverage is essentially the same as on a homeowner's insurance policy. It protects the structure of the home including permanent fixtures.
Liability coverage: On a landlord policy, this coverage can protect you as the property owner against liability claims and lawsuits stemming from the rental. For example, a guest of tenant trips and falls on uneven bricks in the walkway resulting in a concussion and broken wrist. As you, the landlord would most likely be responsible for the maintenance of the property; you may be looking at a lawsuit.
Another example would be if your tenant had a party, and a guest tripped and fell over the tenant's Golden Retriever. You are not responsible for the golden retriever, but if your tenant does not have renter's insurance, you may be dragged into a lawsuit. (Which is why every landlord should insist their tenant's have renters insurance.)
In both of these cases, if the rental were insured on a homeowner's policy, there would be a coverage issue as listed in the exclusion section of many policies is "Coverage does not apply to bodily injury or property damage arising out of the rental..."
Personal property: On a landlord policy, there is very little if any personal property coverage included. (On a homeowner's policy, there is typically personal property coverage included as determined by a percentage of the dwelling limit.) The reason why landlord policies don't include personal property is that tenants are responsible for
If the landlord has some personal property in the rented premises, like a refrigerator, washer, dryer, etc. coverage can be added separately.
Get Landlord Insurance for Your Rental Property
If you rent out a residence, make sure you’re protected with a landlord policy. Don’t be one of the many homeowners that rent their house without realizing they need to adjust their coverage. You may not only have less coverage should a claim occur, but you also may not have any coverage!
Contact your local insurance professional today to talk about the specifics of your situation and get the right coverage!