How much is homeowners insurance on a rental property

How much is homeowners insurance on a rental property

Rental property insurance, also called landlord’s insurance, covers the unique risks of renting out your home or condo for long periods of time. Your coverage includes property damage, liability costs, and loss of rental income for landlords who rent out your property. Whether you’re renting your home, a vacation home, or an investment property, rental property insurance is important protection against the financial risk associated with tenants living in your property.

what does rental property insurance cover?

Rental property insurance coverage will vary, but policies will generally cover the home or structure of your property, the contents of the property owned by the landlord, liability coverage, and loss of rental income. Much of its coverage is similar to that of homeowners insurance, although it has unique features that homeowners insurance lacks and that represent the added risk of having renters in your property.

housing coverage

Like homeowners insurance, rental property insurance covers physical damage to your home, meaning damage to the structure of the house or apartment itself. for example, it will cover damage to your walls and ceiling, but not your tenant’s personal items. coverage will only extend to damage caused by a covered peril, and you should make sure you understand what perils, such as fire or lightning damage, are covered by your particular policy.

Coverage for the landlord’s personal property

Unlike renters insurance, rental property insurance does not cover the personal property of the tenants who live in the property. however, rental property insurance will often include coverage for items left behind by the owner. For example, if you left a lawnmower at your rental home and it is damaged by fire, and fire is a covered peril on your policy, the damage to the lawnmower would be covered by your rental property insurance. On the other hand, if your tenant purchased a personal AC unit that is damaged by the same fire, the AC unit and the rest of the tenant’s property would not be covered by their rental property insurance.

When purchasing rental property insurance, you should check to see if personal property coverage is included in the insurer’s standard policy and, if so, to what extent it will cover your property. sometimes this coverage is only offered as an optional add-on, called an endorsement. in other cases, the coverage will work like appliance insurance for your rental property. this means that only damage to property used to service the apartment, such as a washing machine, can be covered, while damage to a television will not be covered.

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liability coverage

Liability coverage will protect you from the legal and medical costs associated with someone being injured on your rental property. If your tenant or visitor is injured on your property and you are held responsible for the injury, rental property insurance may cover these costs up to your policy limits. If you are someone for whom the limits of this coverage are not enough to cover potential liabilities and you want to increase your coverage, you can also purchase umbrella insurance for your rental property.

rental loss coverage

This coverage provides protection against loss of rental payments if the property you rent becomes uninhabitable due to a covered peril. You can think of it as a form of rental guarantee insurance. For example, if fires are covered by your rental property insurance and fire damage makes the apartment uninhabitable, rental income protection covers you for rent payments that your tenants are no longer required to pay. coverage will generally extend up to a defined period of time, such as 12 months. Loss of rental income is not always standard with rental property insurance, so check your policy before purchasing if this type of coverage is important to you.

types of rental property insurance policies

When looking for rental property insurance policies, you may notice that there are different types of policies called “forms.” Like homeowners insurance, different forms of rental property insurance have different levels of coverage. The descriptions provided below are general, but can give you an idea of ​​what to expect for each type of form.

dp-1: Rental property insurance is classified as a homeowners policy, or dp, and dp-1 is the cheapest form with the most basic coverage. DP-1 forms typically only cover named perils, which means that if a peril or disaster isn’t explicitly mentioned on the form, you won’t be reimbursed for the damage. these policies often reimburse you on an actual cash value basis, which means your insurer will pay you for covered damage less wear and tear, which is called depreciation.

dp-2: This form provides slightly broader coverage than the dp-1. Like the DP-1, the DP-2 coverage tends to be on a designated risk basis. however, dp-2 coverage will generally extend to a broader range of risks. For example, an insurer might offer coverage for theft damage on your DP-2 policy but not on your DP-1. the dp-2 form also improves on the dp-1 by typically providing coverage on a replacement cost basis, meaning that the damages will be covered at the price that would be needed to cover the damages at current market prices, without regard to count depreciation.

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dp-3: This most expensive form provides the widest range of coverage of the three. This type of policy will provide extensive coverage against risks, protecting against all risks, except those explicitly excluded in the policy. Like the DP-2 policy, your coverage will be provided on a replacement cost basis.

optional additions to your rental property insurance

Coverage provided by rental property insurance will vary by insurer, and coverage that is standard with one insurer may be optional or unavailable with another. Here are some examples of common endorsements you can add to your rental property insurance. We recommend searching for quotes to find the best combination of price and coverage that fits your needs.

do you need rental property insurance if you have homeowners insurance?

It depends on how long you intend to lease the property, but in most cases, homeowners insurance coverage will not be an appropriate substitute for rental property insurance. The presence of tenants in a rental property creates unique risks that will not be covered by homeowners insurance, especially if you plan to lease a property for an extended period of time.

The type of insurance you need will depend on how often you rent your home and how long your tenants stay. these distinctions can be divided into three categories: long-term rental, infrequent short-term rental, and frequent short-term rental.

long-term rental: If you have an investment property, vacation home, or second home that you intend to rent to a single person, couple, or family for an extended period of time, you will need insurance of rental property. a long period of time usually means six months or more. The same is true if you are renting out your primary residence for a large part of the year. Compared to owning a home, owning a rental home increases your exposure to certain risks, such as liability issues related to tenants and their guests. Your insurer will not cover these risks under a homeowners policy unless you actually live in your home.

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Infrequent short-term rental: If you only intend to rent your property for a short period of time, such as a week or a few weekends, your homeowners insurance may cover this. This coverage can be standard on your policy if you properly notify your insurer, extending the usual homeowners insurance benefits to periods when you are temporarily renting your property. If it doesn’t come standard, you may be able to purchase an endorsement from your insurer that extends your coverage to temporary rentals. Before you commit to short-term rental, you should contact your insurer to make sure you are notified and that you understand your coverage.

frequent short-term rental: If you plan to rent a property regularly to a variety of people for short periods of time, your property may be considered a business, and not property insurance. nor will rental property insurance cover it. Instead, you’ll need to purchase some form of commercial property insurance to cover the associated risks. For example, Progressive provides “shared housing insurance,” also called vacation rental insurance, for people who rent out their homes or rooms through a service provider like Airbnb or VRBO. These policies include unique features like coverage against bed bugs and identity theft.

You should be aware that while the service providers themselves may offer a limited form of protection, it will typically not be as comprehensive as home-sharing insurance offered by an independent insurer. For example, Airbnb has a host warranty policy that covers property damage to your home up to $1 million per listing, but the policy includes limitations that traditional insurance doesn’t. one limitation is that the coverage request must be submitted within 14 days or before the next guest checks in, giving you limited time to take action and secure reimbursement.

how much does rental property insurance cost?

Rental property insurance is approximately 25% more expensive than an equivalent property insurance policy. Since the national average cost of homeowners insurance is $1,680, you can expect the national average for rental property insurance to be about $2,100. the higher rates reflect the additional risks posed to a landlord over a resident landlord, such as potential loss of rental income and liability for injuries posed by tenants and their guests.

If you’re interested in rental property insurance, major homeowners insurance companies like allstate and state farm offer policies, so you can easily search and compare rental property insurance quotes online. .


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