Rental property insurance, also called landlord insurance, is an insurance policy that’s designed to protect against specific risks when you rent out a property for rental income.
While homeowners insurance may provide coverage if you rent out a room in your home or a vacation property on an infrequent and short-term basis, this coverage generally doesn't extend to long-term or frequent rentals.
What does rental property insurance cover?
If you rent out a property as a source of income, rental property insurance can help cover everything from your liability due to an injury to loss of rental income in the event your rental property is damaged and you're not able to rent it out. Here's a look at the four main coverages in every rental property insurance policy.
Dwelling: Covers the physical structure of your rental property if it’s damaged by a covered peril, such as a fire or extreme weather.
Landlord’s personal property: Covers items and appliances owned by the landlord, like dishwashing machines, washer and dryers, and items used for maintenance like shovels, rakes, and lawnmowers.
Liability: Covers legal and medical expenses if a tenant or visitor is hurt on your property and files a lawsuit.
Loss of rent: Also called fair value rental coverage, this coverage reimburses you for the rent payments that you're not able to collect due to a covered loss.
Similar to when you file a home insurance claim for property damage or loss, you first have to pay your policy deductible, which is the amount you’re responsible for paying before your insurance kicks in to cover the loss.
What does rental property insurance not cover?
While landlord insurance protects against the most common types of damage or loss, it generally won't cover natural flooding or earthquake damage unless you purchase additional coverage. Rental property policies also don't cover the tenant's belongings or personal liability, theft to properties considered vacant, and maintenance issues.
Tenants’ furnishings and personal belongings: Rental property insurance doesn't cover damage to a tenants’ personal belongings inside the rental unit. Your tenant will need renters insurance to cover their own property.
Maintenance issues: Rental property insurance also won't cover wear and tear, gradual damage, or anything that could be considered an ordinary maintenance issue.
Damage or loss while the property is vacant: Rental property insurance generally won't provide coverage after a loss if your rental building has been vacant for more than 60 days.
Flood or earthquake damage: Landlord insurance does not cover damage that occurs due to flooding or earthquakes unless you have additional coverage in your policy.
How much does rental property insurance cost?
The average cost of landlord insurance is around $2,193 per year. This is based on an Insurance Information Institute report that says landlord insurance policies cost 25% more than a standard home insurance policy. [1] With the average cost of home insurance in the U.S. ringing in at $1,754 annually, this means that landlord insurance costs around $439 more per year.
When calculating your quote, insurers take into account the build, age, and location of your residence, as well as other factors that can increase or decrease your chances of filing a claim.
How to buy rental property insurance
When shopping for rental property insurance, it’s important to compare quotes from multiple companies to make sure you’re getting the right policy at the best price. Here are some steps you may want to consider taking when shopping for landlord insurance.
Learn about how much coverage you need. How much coverage you need for the structure of your home will depend on its rebuild value, or replacement cost. You’ll want enough coverage to rebuild your home from the ground up in the event of a disaster. You should also consider your liability coverage limits, which protects you against lawsuits if you’re found responsible for someone’s injury on your property.
Get necessary information about your home and how you plan on renting it. You’ll need to provide insurers with information about your home, like its square footage, age, roof type, and more. You’ll also want to inform the insurance company that this is a rental property. They may have coverage considerations for you, and they may advise you to get your tenants to purchase renters insurance.
Compare rental home insurance quotes. It’s a good idea to compare multiple companies to make sure you aren’t missing out on a better deal elsewhere. A Policygenius agent can help you compare quotes from landlord insurance providers.
Choose your policy and finalize the details. Once you choose your policy, you’ll want to finalize the details and consider any coverage add-ons you might need, like water backup coverage or equipment breakdown coverage.
Rental property insurance companies
Below are a few companies that offer rental property insurance. Most of the insurers listed offer policies in all 50 states.
1. Safeco
Backed by Liberty Mutual, Safeco Insurance is widely available in most states. The insurer offers homeowners insurance as well as comprehensive landlord insurance options.
Key takeaways:
Safeco landlord policies automatically include extended dwelling coverage, which allows you to raise your dwelling coverage limit by 25%.
The insurer also offers optional inflation protection that you can add to your policy.
2. State Farm
State Farm is the largest homeowners insurance company in the country and offers policies in all 50 states. The insurer also sells landlord insurance, along with a few coverage endorsements you can add to your policy for an additional fee.
Key takeaways:
State Farm’s landlord insurance includes equipment breakdown coverage, which pays to repair or replace appliances if they’re damaged by electrical or mechanical breakdown. Other insurers typically offer this as a coverage add-on that costs an additional fee.
Additional coverages you can add to your landlord policy include data restoration and identity theft coverage.
3. Allstate
4. Liberty Mutual
Do I need rental property insurance if I already have homeowners insurance?
Whether or not you need rental property insurance instead of homeowners insurance will depend on if you are renting the home out on a short- or long-term basis.
Short-term rentals
If you live at your residence full-time and rent it out infrequently, like for a weekend once every six months, your home insurance may cover you, but be sure to check with your insurance company about it.
If you have short-term rental properties on Airbnb, your insurer may require you to add short-term rental coverage to your policy. Talk to your insurer about how often you plan to rent out your home to make sure you’re properly covered in the event of a loss.
Long-term rentals
You only need rental property insurance if you have tenants who you rent out your home to on a long-term or full-time basis, like for months or years. Normal homeowners insurance excludes coverage for business property, and a rental property would technically fall under that category since you make money off of it.
Learn more about homeowners insurance vs. landlord insurance
Is rental property insurance required?
While landlord insurance is not required by law, if you have a mortgage on your home your lender will require it. Even if you don't have a mortgage, you should consider rental property insurance to protect your home and liability in the event disaster strikes. If you don't have landlord insurance, you'll have to foot the bill yourself if your home is damaged or broken into.
Rental properties are also more of a liability risk, since if a tenant or visitor gets injured while in your rental home you could be found liable for their injury and have to pay medical bills or legal fees if they file a suit against you. With landlord insurance, your policy could pay for the above circumstances if it's caused by a covered loss.
Do I need to change my homeowners insurance if I rent out my house short-term?
If you live at your home most of the year and rent out the entire property or a room intermittently, your existing homeowners insurance policy may cover your guests, provided you let your insurance company know the deal beforehand. If you use a home-sharing service like Airbnb, some insurers may require something like a short-term rental coverage add-on to cover liability occurrences while the home is rented out.
