How is Landlord Insurance Different From Homeowners Insurance?

Renting out a property can be an arduous endeavor bound with rules and regulations for potential landlords to learn. A crucial step for landlords is to research and implement sufficient insurance coverage for their rental properties — namely understanding the differences between landlord insurance and mortgage insurance.

What is Landlord Insurance?

Landlord insurance is available for homeowners who rent out a property. As the name implies, it protects landlords from financial losses associated with the various risks they face, including property damage, liability and loss of rental income.

It can be used for a variety of property types, including single-family houses, multiplexes, condos, apartments and an accessory dwelling unit (ADU). Policy pricing may vary depending on the type of property.

How is it Different From Regular Mortgage Insurance?

Mainly, they serve different purposes. Landlord insurance covers damage caused by tenants. These include liability claims and lost rental income due to unforeseen circumstances, like a fire or a broken pipe.

Mortgage insurance protect lenders from financial losses in the event the borrower defaults. This can include coverage for the outstanding balance of the loan, as well as any associated legal fees or costs related to foreclosure.

Do Landlords Need It?

Absolutely.

Liability coverage through landlord insurance covers legal fees and damages if a tenant or visitor is injured on the rental property. Loss of rental income coverage kicks in if a rental property is uninhabitable because of a covered event. These can run into the thousands of dollars.

In some instances, landlord insurance alone is not enough coverage for the property. Check all elements of the coverage policy before signing to see if certain protections are not included. Things like vandalism and burglary might not be covered in the policy, but could be available with a different insurance provider or with an upgrade to the policy plan.

Landlords could also require tenants to purchase their own renters insurance policy, which will cover belongings in case of natural disasters, flooding, fires, theft and more. Renters insurance typically covers personal items like clothes or furniture, but could have additional protections depending on the policy.

Do I Need Landlord Insurance for a Short-Term Rental?

That depends — but typically, yes.

Short-term rentals, like Airbnbs, are a great way for homeowners to make passive income. However, like any rental property, they do come with liabilities. Most homeowner’s plans do not cover short-term rentals. And unlike long-term rentals, landlords can’t require their guests to purchase renters insurance.

Some providers lump short-term rentals into their standard landlord insurance policies. However, other insurance providers might have a separate plan exclusively tailored for short-term rentals. Airbnb provides its own limited coverage for property owners in case of damages to the property or other liabilities.

It’s imperative to check the terms to see if enough coverage is in place. Properties with large staircases, pools, or apartments or condos on high floor levels where the risk of serious injury or death is higher will likely need more protection.

Is Landlord Insurance More Expensive Than Homeowners Insurance?

That depends on various factors and individual circumstances. The cost of landlord insurance depends on the location and value of the property, the type of coverage and the deductible.

Landlord insurance and mortgage insurance may have different requirements and qualifications for coverage. Landlord insurance may require certain safety features or inspections to be in place, like working smoke detectors or regular pest control treatments. Mortgage insurance, on the other hand, may require borrowers to meet certain credit or income requirements.