Do I Need Homeowner’s Insurance for a Rental Property?

Beth Davis

All County Editor

Data from the Insurance Information Institute (III) shows that between 2017 and 2021, nearly 6% of insured homes filed a claim on their homeowner’s insurance policy. While 6% doesn’t seem like a high number, the average cost of damage was about $15,000. Homes with fire damage experienced over $80,000 in damages! 

If you don’t have a property insurance policy, you could risk paying out of pocket for these losses should a catastrophe occur. 

Yet, when looking at the types of insurance, it can get confusing to know which home insurance to buy, especially for a rental property. Do you need homeowner’s insurance for a rental property or another form of insurance? 

Below, we’ll explain the insurance you should buy for your rental property for maximum coverage. 

Homeowner’s Insurance vs. Landlord Insurance 

Homeowner’s and landlord insurance have many similarities but offer varying services, coverage options, and conditions. 

Both insurance types provide financial protection if a natural disaster damages the home. Each unique policy will cover physical property damage from a covered peril, such as: 

• Fire 
• Hail storm 
• Lightning 
• Wind storm 
• Another covered loss 

However, both insurance types don’t cover damage for every natural disaster. For example, exclusions such as flood and earthquake damage are standard and require additional coverage. You may also need additional coverage for building code changes and vandalism. 

Each policy will likely also cover free-standing buildings on the property, like a shed or detached garage, and items left on-site that help maintain the property, such as a lawnmower or snow blower. 

The coverage also includes personal liability (legal responsibility) for injuries or damage to others caused by you or other household members. 

An essential difference between these insurances is that landlord insurance covers rental income should your property become uninhabitable, and tenants need to move out. Your policy will pay you for the loss of rent for a set period. 

The insurance cost for each type differs based on several factors, such as: 

• Amount and type of coverage 
• Deductible 
• Policy limit 
• How many people live on the property 
• How frequently you rent out the property 

Personal Property Coverage 

Buying homeowner’s insurance will cover all types of personal belongings, including: 

• Clothing 
• Electronics 
• Furniture 

Yet, landlord insurance doesn’t cover a tenant’s personal belongings. If your tenants want to receive replacement costs for damaged or stolen personal items on the rental property, they should purchase a renters insurance policy. 

Rental property insurance explicitly covers these items in the event of a natural disaster or theft. 

Liability Coverage 

Like auto insurance, homeowner’s and landlord insurance offer liability coverage, which covers the costs if a tenant, guest, or vendor sues you after becoming injured on your property. It includes the following expenses: 

• Court fees 
• Legal fees 
• Medical bills 

However, landlord insurance only provides coverage related to the rented property, whereas a homeowner’s insurance policy often covers those who live on the property regardless of where the accident happens. 

Thus, if you experience an injury outside the home, your homeowner’s insurance policy may cover the injury. This can go a long way in helping to pay for costly medical expenses. 

Do I Need Homeowner’s Insurance for a Rental Property? 

The type of rental property you have will determine whether you can use your homeowner’s insurance policy for coverage. As you’ll see, sometimes homeowner’s insurance for rental properties is enough, but other times, you’ll need another type of coverage. 

Irregular or One-Time Short-Term Rentals 

If you want to rent a room in your home while you are still there, your homeowner’s insurance will likely cover you, as the insurance is for owner-occupied dwellings. However, renting out your primary residence for a night or weekend while you’re away will require additional insurance coverage. 

Speak with your insurance agent to see if you can add protection to your homeowner’s insurance to cover short-term home sharing. This option is often available for irregular stays. 

But consider a landlord insurance policy if you rent your home more regularly. It will offer the best coverage for your property and those occupying it. 

Long Term Rentals 

Long-term doesn’t necessarily mean renting your property full-time but instead refers to rentals one month or longer in length. 

You’ll want landlord insurance if you rent your entire primary residence long-term because longer stays cause more wear and tear. As mentioned, this protects your property while you’re away. Should the tenants or a natural disaster cause damage to the property, making it uninhabitable, you’ll have a loss of rental income coverage. 

If you have a renter staying in part of the home while you still occupy it, speak with your insurance provider about adding more coverage to your homeowner’s insurance policy. 

Vacation Home and Investment Property Rentals 

If you have a vacation home on Airbnb or own an investment property, you’ll want landlord or vacant home insurance, depending on how often you rent out the property. 

For properties with steady tenants, go for landlord insurance. If the property will be vacant for longer than 30 days, look into vacant home coverage. 

This advice also applies to those thinking, “Should I sell my house or keep it?” As you ponder this decision, get vacant home insurance for the property after you move into your new home. This allows you to sell the property or keep it as a rental. If you keep it, you can always get landlord insurance when needed. 

Does Homeowner’s Insurance Cover Rental Property? 

A standard homeowner’s insurance policy usually doesn’t cover damages that occur when you rent out the space. Thus, it is best to first speak to your insurance provider to see what your policy covers. 

Your home insurance policy may provide enough coverage if you rent a room in your primary residence while still living there. But often, if you rent a non-owner-occupied dwelling, you’ll need another form of insurance. 

Whether you need landlord insurance, commercial insurance, liability insurance, umbrella coverage, or some other type of insurance will be for you to decide with the insurance company you choose to work with. 

Find the Rental Property Advice You Need 

So, do I need homeowner’s insurance for a rental property? Usually, you don’t, but you will need another form of insurance to cover damages and liabilities. 

Getting the right insurance is only one aspect of renting a property. It’s best to consider hiring a property management company to help you find reliable tenants and maintain the premises. Find a property manager with All County today and learn more about how our team can help you!