Landlord Insurance vs. Homeowners Insurance: A Professional Explains

When you transition from living in your home to renting it out, one of the most important changes you need to make is to your insurance policy. Many landlords start out as homeowners, and it can be easy to overlook the need for different coverage. So, what’s the difference between landlord insurance and homeowner's insurance? And why does it matter?

We sat down with Andrew Cowen of FirstMark Insurance Group to break it down.

What’s the Main Difference Between Landlord Insurance vs. Homeowners Insurance?

Homeowners insurance is designed for owner-occupied properties. It protects the structure of your home, your personal belongings and provides liability coverage if someone is injured on your property while you live there.

In contrast, landlord insurance is designed for rental properties. It also covers the structure and provides liability protection, but instead of focusing on your personal possessions, it includes coverage for things like loss of rental income and damage caused by tenants.

In short:

• Homeowners insurance = Protection for the home you live in.
• Landlord insurance = Protection for the home you rent out.

If you're renting out your property, switching from homeowners insurance to landlord insurance is not optional—it's essential.

Do I Really Need to Switch Policies If I Rent Out My Home?

Yes. Insurance companies consider a home being rented a different risk than a home you live in.

If you continue using a homeowner’s policy while tenants are living in your property, your coverage could be denied if a claim arises. Most policies explicitly exclude coverage if the property is not owner-occupied.

As soon as you know you'll be renting out your property, contact your insurance agent to update your policy. It’s a crucial step in protecting your investment.

What Does Landlord Insurance Cover That Homeowners Insurance Doesn’t?

There are several key areas where landlord insurance offers coverage that homeowners insurance typically does not.

Loss of Rental Income

If your rental property becomes uninhabitable due to a covered event (like fire or storm damage), landlord insurance can reimburse you for the lost rental income. This ensures you don’t lose your expected cash flow while the home is being repaired.

Homeowners insurance includes "loss of use," which pays for your own living expenses if you have to move out—not the same as covering rent you’re no longer receiving.

Tenant-Caused Damage

Tenant damage, particularly if it’s intentional or malicious, can get expensive quickly. Landlord insurance typically includes coverage for these scenarios.

For example:

• A tenant breaks windows or doors.
• Spray-paint the walls.
• Damages drywall or flooring intentionally.

These are typically not covered under a homeowner's policy because that coverage assumes the damage was accidental and caused by the owner.

Liability Protection

If someone is injured on your rental property and holds you liable, landlord insurance helps cover legal expenses and medical bills. This is essential when tenants and their guests frequently come and go from the property.

Limited Personal Property Coverage

Landlord insurance provides limited coverage for items that belong to you and are used by the tenant, such as:

• Appliances
• Lawn care equipment
• Maintenance tools

However, it does not cover your tenant's belongings. Your tenants should carry renters insurance for that.

How Much Does Landlord Insurance Cost Compared to Homeowners Insurance?

The cost of landlord insurance vs. homeowner's insurance can vary depending on several factors:

• Location of the property
• Property condition and size
• Deductible and policy limits
• Claims history

Generally, landlord insurance costs about 10% to 25% more than a standard homeowners policy. The extra cost reflects the added risk and the additional coverages, such as rental income protection and tenant-caused damage.

Though it may be slightly more expensive, the long-term financial protection is well worth it.

Can I Customize My Landlord Insurance Policy?

Yes, many insurance providers offer flexible options to tailor landlord policies to your unique needs.

Some common policy add-ons include:

• Umbrella liability coverage for added legal protection
• Flood or earthquake insurance (often not included in standard policies)
• Fair rental value or guaranteed income coverage
• Legal expense coverage for eviction-related or tenant dispute issues

Speak with your insurance agent to determine which enhancements make sense for your property.

What About Renters Insurance?

While landlord insurance covers the property and your liability, it does not extend to your tenants' personal belongings. That’s why encouraging or requiring renters insurance is a smart move.

Renters insurance provides your tenants with:

• Protection for personal belongings
• Temporary housing assistance if the property is uninhabitable
• Liability coverage for accidents caused by the tenant

Many landlords now include renters insurance requirements in their leases for added peace of mind.

Final Thoughts: Which One Do You Need?

If you live in your home, you need homeowners insurance. If you rent it out, you need landlord insurance. It's that simple.

These policies are structured to cover different types of risk. Using the wrong one can lead to denied claims or unexpected expenses.

Whether you're a first-time landlord or expanding your rental portfolio, ensuring the right insurance is in place is critical for protecting your investment.

Ready to Make the Switch or Have Questions?

Understanding the differences between landlord insurance vs. homeowner's insurance is key to being a responsible and well-prepared property owner.

If you're converting your home to a rental or want help navigating your insurance options, we’re here to assist.

Contact Real Property Associates today to speak with a local expert. From landlord insurance questions to full-service Seattle property management, we’re ready to support your journey as a successful rental property owner.