Is Landlord Insurance More Expensive Than Homeowners Insurance?

On average, landlord insurance costs about 25% more than homeowners insurance, driven by the need for additional coverage tailored to rental properties.

By Mark Fitzpatrick

Edited by Victoria Copans

Updated: September 23, 2024

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Landlord insurance typically costs about 25% more than standard homeowners insurance, according to the Insurance Information Institute. This increase is due to the additional protections required for rental properties, such as protection against loss of rental income if the property becomes uninhabitable. There is also more risk inherent in renting a property out to someone who does not have a financial stake in it. While costly, landlord insurance can help landlords to mitigate the risks associated with renting out their property.

TABLE OF CONTENTS

Why Landlord Insurance Is More Expensive Than Homeowners Insurance
How to Keep Your Landlord Insurance Premiums Low
FAQ: Landlord Insurance vs. Homeowners Insurance Costs

Key Takeaways

Landlord insurance generally costs about 25% more than homeowners insurance due to additional protections needed for rental properties.

Landlord insurance includes coverage for property damage, liability issues and loss of rental income, the latter of which homeowners insurance typically does not cover.

While not legally required, landlord insurance is highly recommended and may be mandated by mortgage lenders.

Why Landlord Insurance Is More Expensive Than Homeowners Insurance

Landlord insurance is more expensive than homeowners insurance because it includes additional protections tailored to rental properties that address the unique risks landlords face, including loss of rental income. Below are the specific areas where landlord insurance provides enhanced coverage:

Property Damage Protection

Landlord insurance covers physical damage to the rental property caused by perils such as fire, lightning or wind, ensuring the property is restored or repaired without financial strain. This protection extends to any personal property left on-site for tenant use or to maintain the property, such as appliances or furniture.

Liability Coverage

Landlord insurance includes liability protection if a tenant or visitor is injured due to a property maintenance issue, such as a loose railing, a damaged step or an improperly maintained pathway. This coverage helps landlords handle legal fees and medical expenses associated with such incidents.

Loss of Rental Income

If the rental property is damaged and becomes uninhabitable, landlord insurance covers the loss of rental income during the repair or rebuilding process. This ensures that landlords are not financially disadvantaged due to circumstances beyond their control. Standard homeowners insurance does not cover rental income loss as there are no tenants involved.

IS LANDLORD INSURANCE REQUIRED BY LAW?

Although landlord insurance is not legally required in most places, some mortgage lenders may require it as a condition for financing a rental property. Even without the requirement, having landlord insurance is strongly recommended.

While homeowners insurance might suffice for owner-occupied properties, it often doesn't provide the necessary coverage for rental properties and usually isn't an option for landlords. Ultimately, having landlord insurance offers crucial protection against potential risks and liabilities associated with renting out your property.

How to Keep Your Landlord Insurance Premiums Low

Raising your deductible and implementing safety measures like installing smoke detectors can lower your landlord insurance premiums. These strategies can reduce the overall risk to the property and increase your chances of qualifying for discounts on your insurance.

To keep premiums low, consider:

1
Bundling Insurance Policies
Bundling your landlord insurance with other policies, such as auto or home insurance, often results in a multi-policy discount. This approach can significantly lower your overall insurance costs while maintaining comprehensive coverage.
2
Screening Tenants Thoroughly
Screening tenants for a good credit history and no prior claims reduces the likelihood of incidents that lead to insurance claims. This practice helps keep your premiums lower over time, as insurers may offer better rates for properties with fewer claims.
3
Increasing Security Measures
Installing security systems, such as alarms or surveillance cameras, can reduce the risk of theft or vandalism. Insurers often provide discounts for properties with enhanced security, leading to lower premiums.
4
Maintaining the Property Regularly
Regular maintenance, such as fixing leaky roofs or repairing damaged walkways, minimizes the risk of costly claims due to property damage or tenant injuries. Insurers may reward proactive property management with lower premiums.
5
Paying Annually Instead of Monthly
Paying your insurance premium in one annual lump sum can sometimes come with a discount. This option also helps avoid monthly service fees that can add up over time.

FAQ

To help you understand the differences between landlord and homeowners insurance, we've compiled a list of frequently asked questions that address common concerns and provide clarity on landlord insurance.

How much more is landlord insurance than homeowners insurance?

Landlord insurance typically costs about 25% more than standard homeowners insurance. This increase reflects the additional protections needed for rental properties, such as loss of rental income.

What does landlord insurance cover?

Landlord insurance generally covers property damage, liability protection and loss of rental income. These coverages ensure that landlords are financially protected from various risks associated with renting out their property.

Is landlord insurance required by law?

While landlord insurance is not legally required, it is highly recommended. Many mortgage lenders may require it as a condition for financing a rental property.

Can I pass the cost of landlord insurance onto my tenants?

Landlords cannot directly charge tenants for insurance, but they can factor the cost into the rent. Including this expense in the rental price helps cover the insurance premiums without directly billing tenants.

Does landlord insurance cover tenant belongings?

No, landlord insurance does not cover tenant belongings. Tenants should be encouraged or required to obtain renters insurance to protect their personal property.

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About Mark Fitzpatrick

Mark Fitzpatrick is a Licensed Property and Casualty Insurance Producer and MoneyGeek's Head of Insurance. He has analyzed the insurance market for over five years, conducting original research and creating personalized content for every kind of buyer. He has been quoted in several insurance-related publications, including CNBC, NBC News and Mashable.

Fitzpatrick earned a master’s degree in economics and international relations from Johns Hopkins University and a bachelor’s degree from Boston College. He is passionate about using his knowledge of economics and insurance to bring transparency around financial topics and help others feel confident in their money moves.

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sources

Insurance Information Institute. "Coverage For Renting Out Your Home." Accessed September 23, 2024.