Renters insurance and landlord insurance both involve rental properties, but these two types of insurance cover different things. Think of them as two sides of the same coin.
Landlord insurance covers assets the landlord owns (the house or apartment), while renters insurance covers assets owned by people renting the property (the belongings inside).
Both landlord and renters insurance is separate from homeowners insurance. A common misconception is that homeowners insurance will cover rented homes, but that’s usually not the case.
Homeowners insurance is typically used for owner-occupied homes. If the home is rented out for an extended period of time, the homeowners insurance won’t be enough to cover it. That’s because homeowners insurance isn’t designed for commercial endeavors.
The purpose of landlord insurance is to cover the investment of the landlord. While landlord insurance is similar to homeowners, landlord insurance includes heightened protections that are absent from standard homeowners insurance policies.
What is landlord insurance and what does it cover vs. renters insurance?
Landlord insurance is specialized coverage for people who rent properties. This form of insurance serves a similar purpose as a homeowners policy—they both protect homes. Landlord insurance is distinct because insurers providing the policy treat the rented home as a business.
On the other hand, renters insurance provides no protection for the home at all.
While landlord insurance is paid by the landlord to protect the home from damages and the landlord from liability, renters insurance is paid by the person renting the home. This insurance only protects the renter’s belongings and the renter from liability.
Although renters insurance is not required by law, many landlords require renters to get insurance before signing a lease.
Both types of insurance are important to understand, and both types contain some of the same coverages. Let’s take a closer look at each coverage and how the two policies stack up.
Property damage
This coverage pays for damage to the home inflicted by perils such as natural disasters and vandalism. This coverage will also pay for damage to the home inflicted by tenants. Some landlord policies will also cover on-site appliances owned by the landlord like dishwashers and refrigerators.
- Landlord: Property damage is included in landlord insurance. Landlords own the property, and the main purpose of buying this insurance is to protect the rental property.
- Renters: Property damage is not included in renters insurance. Renters do not own the property they are renting, so they do not need to provide coverage for the home.
Lost rental income
This coverage pays for the loss of income from a rental home that’s been damaged. When a home needs major repairs after an incident, people usually won’t be able to live there during the process. This coverage pays for the lost rent while the home is repaired.
- Landlord: Lost rental income is included in landlord policies. Being able to recoup income while a rental home is under repair provides a big advantage for landlords. It protects the policyholder from financial loss when a home cannot be used as a rental.
- Renters: Lost rental income is not included in renters insurance. The renter does not own the property and has no claim on lost income if the property needs to be repaired.
Liability protection
This coverage pays for legal and medical expenses that may arise after someone is injured on the insured property. If someone slips and falls on the property and then sues, this coverage will protect the policyholder from the resulting expense.
- Landlord: Liability protection is usually included in landlord insurance. When someone is injured on a rental property, the landlord might be found at fault. If the landlord is found legally liable, this coverage will protect them from the ensuing legal and medical expenses.
- Renters: Liability protection is usually included in renters insurance. If someone is injured on a rented property, the person renting the home could be found at fault instead of the landlord. In this case, liability protection would protect the renter from legal and medical expenses if the renter is found legally responsible.
Guaranteed income insurance
This is an optional coverage that pays for the income from a rental property when the rent goes unpaid. If the renter comes up short or fails to pay rent, this coverage will pay the difference.
- Landlord: Guaranteed income insurance is an optional coverage for landlords. Insurance providers will usually offer the coverage for an additional fee.
- Renters: Guaranteed income insurance is not a coverage that is commonly offered with renter insurance.
Flood insurance
This coverage pays for damage from flooding and is usually sold separately from standard policies. Different kinds of flood insurance cover different things, but generally speaking, flood insurance can cover both the dwelling and the belongings inside.
- Landlord: Flood insurance is optional for landlords. This coverage can be purchased for an additional cost to protect the rented home after sustaining flood damage.
- Renters: Flood insurance is also an option for renters. People who rent a home can purchase renters flood insurance to protect their personal belongings within the home.
Emergency coverage
This coverage pays for expenses resulting from on-property emergencies like when an appliance breaks. For smaller emergencies that require repair expenses, emergency coverage will pick up the tab.
- Landlord: Emergency coverage is optional for landlords. Many landlords choose to include this coverage to ensure smaller emergency expenses don’t eat up the revenue from the rental.
- Renters: Emergency coverage is not commonly offered as an optional coverage for purchase in renters insurance policies.
Rental dwelling insurance
Rental dwelling insurance is generally used as another name for landlord insurance, and many insurers use the two names interchangeably. When looking into a landlord insurance quote, note it might be referred to as rental dwelling insurance, but both terms usually refer to the same thing.
Temporary living expenses
This coverage pays for the cost of temporary housing and meals when a home is under repair. After a home sustains major damage from an incident, it might be unlivable while it is being repaired. Coverage for temporary living expenses will pay for the person who was renting the home to stay elsewhere.
- Landlord: Temporary living expenses is not a coverage usually offered with landlord insurance.
- Renters: Temporary living expenses is a coverage commonly included in renters insurance. However, this coverage varies from company to company, so it’s a good idea to check the details when signing up for a renters policy.
How much is landlord insurance vs. renters insurance?
Landlord insurance is much more expensive than renters insurance. In fact, landlord insurance costs even more than homeowners insurance. The Insurance Information Institute notes that on average, landlord insurance costs about 25 percent more than a standard homeowners policy.
Even though landlord insurance is expensive, it can be beneficial in tax season because landlord insurance can be written off as an expense. Thankfully, renters insurance is much less expensive compared to homeowners insurance.
The average premium for a homeowners insurance policy in the U.S. is $1,211, or about $100 per month. The average premium for renters insurance is $15 to $30 per month. So renters insurance can be purchased for a much lower cost than homeowners insurance.
The takeaway
Landlord insurance and renters insurance both involve rental homes, but the two insurance types are different.
Landlord insurance is paid by the landlord and covers the home, owner liability and loss of use. Renters insurance is paid by the renter and covers personal belongings, renter liability and temporary living expenses.
With these differences in mind, landlords and renters alike should be well prepared to find the best fit for their insurance needs.