Renting out a house, condo, or duplex can create steady income, but it also brings risks that a typical homeowner does not face. A tenant’s guest could slip on icy steps, a kitchen fire could make the unit uninhabitable for months, or a storm could damage the roof. Homeowners insurance usually does not cover properties you rent out full time. Instead, rental property owners need landlord insurance, sometimes called rental property or dwelling fire insurance. This guide explains what landlord insurance covers, how it differs from homeowners insurance, the main policy types, costs, and tips for choosing coverage. Policy terms vary by insurer and state, so read your policy carefully.
What landlord insurance is
Landlord insurance is a policy designed for residential properties rented to tenants. It generally covers:
- The building and other structures on the property
- Liability for injuries or property damage you are legally responsible for
- Lost rental income if a covered loss makes the property unrentable
It does not cover tenants’ personal belongings. Tenants need their own renters insurance for that, and many landlords require it in the lease.
Why homeowners insurance is not enough
Homeowners insurance is designed for owner-occupied homes. If you move out and rent the home to tenants, your homeowners policy may not cover losses, and an insurer could deny claims. Many insurers require you to notify them when a home becomes a rental. Some policies allow occasional short-term rentals with an endorsement, but full-time rentals usually require a landlord policy.
What landlord insurance covers
Dwelling coverage
Pays to repair or rebuild the structure after covered perils, such as fire, wind, hail, lightning, and certain water damage. Coverage often includes built-in appliances and fixtures.
Other structures
Covers detached garages, sheds, and fences on the property.
Landlord’s personal property
Covers items you own and keep at the rental for its use, such as appliances you provide, lawn equipment, or furniture in a furnished rental, up to policy limits.
Liability coverage
Covers legal costs and damages if you are found responsible for injuries or property damage, such as a tenant’s guest falling on a broken stair you failed to repair. Liability coverage may be included or added to dwelling fire policies.
Loss of rental income
Also called fair rental value or loss of rents coverage, this pays the rent you lose while the property is being repaired after a covered loss, such as a fire.
DP-1, DP-2, and DP-3 policies
Many landlord policies are built on standardized dwelling property forms.
| Form | Coverage | Claims settlement |
|---|---|---|
| DP-1 (basic) | Named perils, such as fire, lightning, and explosion; often limited | Often actual cash value |
| DP-2 (broad) | Additional named perils, such as falling objects, weight of snow, and some water damage | Often replacement cost for the dwelling |
| DP-3 (special) | Open perils, covering all risks except those excluded | Usually replacement cost for the dwelling |
A DP-3 policy offers the broadest protection and is common for landlords. Actual cash value policies subtract depreciation, which can leave a gap for older properties.
Optional coverages
- Flood insurance, which standard policies exclude, available through the National Flood Insurance Program or private insurers
- Earthquake insurance, typically a separate policy or endorsement
- Sewer backup coverage
- Equipment breakdown, for systems such as HVAC units
- Ordinance or law coverage, for costs of rebuilding to current building codes
- Vandalism and malicious mischief, which may be limited if the property is vacant
- Rent guarantee coverage, offered by some insurers, for lost rent if tenants stop paying
What landlord insurance usually does not cover
- Tenants’ personal property
- Normal wear and tear and maintenance problems
- Pest infestations, mold from long-term leaks, and gradual damage
- Flood and earthquake damage, unless added
- Damage while the property is vacant for an extended period, often 60 days or more
- Business activities by tenants
Vacancy considerations
Many policies limit or exclude coverage when a property is vacant for a certain period, often 60 consecutive days. If your rental will sit empty during renovations or between tenants, ask about vacancy endorsements or a vacant property policy.
Short-term rentals
Short-term rental platforms may provide some host protection, but it is not a substitute for insurance and may have significant exclusions. If you rent through short-term platforms, look for a policy or endorsement specifically designed for short-term rentals.
Landlord insurance vs. renters insurance
Landlords and tenants each need their own coverage, and confusion about who covers what is common.
| Situation | Landlord insurance | Renters insurance |
|---|---|---|
| Fire damages the building | Covers repairs to the structure | Does not cover the building |
| Fire destroys the tenant’s furniture and clothes | Does not cover | Covers the tenant’s belongings |
| Tenant must move out during repairs | Covers the landlord’s lost rent | Covers the tenant’s additional living expenses |
| Guest is injured due to a broken stair the landlord failed to fix | May cover the landlord’s liability | Generally does not cover |
| Tenant’s dog bites a visitor | Generally not the landlord’s liability, unless the landlord is found responsible | May cover the tenant’s liability |
Requiring renters insurance in the lease helps protect both parties. Some landlords ask to be listed as an interested party so they are notified if the tenant’s policy lapses.
Insuring multiple rental properties
Investors with several rentals may be able to combine them under a single commercial or portfolio policy, which can simplify management and sometimes lower costs. Owners with larger multifamily buildings or mixed-use properties often need commercial property policies rather than dwelling forms. Ask an agent who works with real estate investors to review your portfolio, confirm that each property is listed correctly, and check that liability limits are adequate for the total number of units you own.
How much landlord insurance costs
Landlord insurance often costs more than homeowners insurance for a similar property, partly because rentals tend to have more claims and include lost rent coverage. Cost factors include:
- Location, including weather and crime risks
- Property age, size, and construction type
- Number of units
- Coverage form, such as DP-1 vs. DP-3
- Liability limits and deductibles
- Claims history
- Security and safety features
Umbrella insurance for landlords
Landlords with multiple properties or significant assets often add an umbrella policy, which provides additional liability coverage beyond the limits of their landlord policies. Owning properties in an LLC does not replace the need for adequate insurance.
Tax considerations
Landlord insurance premiums for rental properties are generally deductible as a rental expense on Schedule E. Keep records of premiums and claims.
Tips for choosing landlord insurance
- Insure for replacement cost, not market value.
- Choose adequate liability limits, and consider umbrella coverage.
- Add loss of rent coverage with enough months to cover major repairs.
- Require tenants to carry renters insurance and keep proof.
- Maintain the property to reduce claims and liability risk.
- Review policies annually, especially after renovations or rent increases.
- Compare quotes from insurers experienced with rental properties.
An example
Angela owns a duplex she rents to two families. A kitchen fire in one unit causes major damage and makes both units uninhabitable for four months. Her DP-3 landlord policy pays to repair the building, and her loss of rent coverage replaces the rent from both units during repairs. The tenants’ renters insurance policies cover their personal belongings and temporary housing.
Related reading: Pet Insurance Explained: How Policies Pay, What They Exclude, and Whether It Pays Off.
Frequently Asked Questions
What does landlord insurance cover?
It typically covers the rental building, other structures, the landlord’s personal property used for the rental, liability, and lost rental income after covered losses.
Does landlord insurance cover tenants’ belongings?
No. Tenants need renters insurance to protect their personal property.
Is landlord insurance required?
It is not legally required, but mortgage lenders usually require coverage on rental properties, and it protects your investment.
What is a DP-3 policy?
A DP-3 is an open-perils dwelling policy that covers all risks except those excluded, usually with replacement cost coverage for the dwelling.
Is landlord insurance tax deductible?
Generally yes. Premiums for rental property insurance are typically deductible as a rental expense.
This article is for general informational purposes only and is not legal, medical, tax, or financial advice. Rules vary by state and change over time; confirm details with the relevant agency or a licensed professional.
