Landlord Insurance vs. Homeowners Insurance: What’s the Difference?

In the world of property management, there are a handful of things that are considered essential.

These can include an office, employees, tenants, and most importantly, a rental property.

However, the most essential element would be something that can protect all of these other assets.

If you haven't guessed it, we're talking about insurance.

However, there are various kinds of insurance, like homeowners insurance, renters insurance, landlord insurance, property management insurance, and others.

Each of these covers different aspects of an investment property or a property management company. For some people, though, the difference between homeowners insurance and landlord insurance can be confusing.

So, in this guide, we will be explaining the difference between these two kinds of insurance. To begin, let's go over what a homeowners insurance policy will cover and what a landlord insurance policy will cover.

Landlord Insurance vs Homeowners Insurance: Coverage

One of the main things that people are concerned with when it comes to their insurance policy is coverage. In this section, we will be explaining what these two kinds of insurance cover, and what they don't.

So without further ado, let's discover how coverage differs between homeowners insurance and landlord insurance.

Where the Insured Resides

The first notable difference between the two kinds of policies is where the insured actually resides. With homeowners insurance, the insured must reside alongside the tenant within the home. This means that the person paying for the insurance must be living on the actual property.

However, with landlord insurance, the insured does not necessarily have to live in the insured home. The insured can reside either in the home, on the premises, or virtually anywhere else. This means that the insured can live anywhere, including the rental property.

Damage Protection

The next section covers the damages that these insurance policies will protect against. Although your specific insurance company may have some different protections, they are mostly the same.

Both landlord and homeowners insurance actually cover the same things here, which are:

• Fire
• Lightning
• Wind
• Water
• Hail
• Other covered events

These protections apply to the main building as well as any other structures that are part of the insurance policy.

Personal Property Coverage

Next, we will be going over the different protections that these insurance policies grant personal property.

With homeowners insurance, most of the property is covered for specific events. This includes furniture, clothing, or any electronics within the property. Insurance providers may dictate which events are protected under the policy, like fire, theft, or natural events.

On the other hand, landlord insurance policies cover a different range of things. Landlord insurance coverage includes any items that are owned by the policy owner but that are also used to service the rental property. This includes maintenance equipment, furniture, and appliances used by the tenants.

Liability Coverage

When it comes to liability protection, there is some slight difference between the two kinds of insurance.

With homeowners insurance, you are protected when you are responsible for the damage. This means that it doesn't matter where the event occurred, you are protected if you were responsible for the damage.

For landlords insurance, a liability insurance policy will cover accidents that occurred on the rented premises. Since they occurred on your property, you are legally responsible for them, and you are protected.

Tenant Personal Belongings

Again, the two kinds of insurance are actually the same here. Neither landlord insurance nor homeowners insurance cover tenant personal belongings. For this reason, it is recommended that renters invest in a renters insurance policy.

Now that we know about some of the differences in coverage, let's go over how the costs of these two policies compare to each other.

Landlord Insurance vs Homeowners Insurance:  Costs

Although many people relate any insurance to being very costly, it is not as bad as one may think. This is especially true when you compare it with the amount of money that it can save you.

The average annual cost for a homeowners insurance policy is around $2300. This means that it will cost around $200 a month for a full policy. This may sound like a lot of money but it is important to remember that this policy can save you thousands of dollars one day.

However, the landlord insurance cost is a little higher. The national average sets landlord insurance at around 20 percent more than the price of a homeowners policy. This is because the typical landlord policy covers more than the typical homeowner's policy and therefore costs more.

If you're worried about paying too much for insurance, there are some ways that you can reduce the price. Listed below are some of the best ways to lower the cost of insurance.

Lowering the Cost of Landlord Insurance and Homeowners Insurance

There are several ways that you can lower the cost of your homeowner's policy or the landlord's policy. Below, we have listed some of the most common ways to do so.

Maintaining the Property

Well-maintained homes have fewer claims which means that the insurance will be lower for those homes. So, if you keep your property in good shape, there is a good chance that the price you'll pay for insurance is lower.

Prohibiting Smoking

Smoking on the property increases the risk of property damage and also gives the property a unique smell. Include a section in your lease agreement outlawing smoking to protect against this.

Requiring Renters Insurance

Another way to reduce the costs of insurance for your property is to require that your tenants carry renter's insurance. This kind of insurance protects their personal property and provides liability coverage if their guests are injured on your property.

Since there is no coverage for your tenant's personal belongings in the landlord policy, it is important to avoid litigation and require renters insurance. This way, if any of the tenant's belongings are damaged, regardless of whether it is your fault, you won't have to pay for it.

Adding Safety Equipment

If the insurance company knows that the home is safe and secure, they may lower the price of your insurance. The best way to achieve this is by installing alarms, security cameras, and motion detectors all over the property.

How to Decide Between Homeowners Insurance and Landlord Insurance

Lastly, we will be discussing the process of choosing between homeowners insurance and landlord insurance. We are going to go over three common scenarios and explain what kind of insurance is most important.

Renting Out a Room in Your Home

If you are just renting out a room in your home but are still going to be living there, homeowners insurance may be completely fine. This means that you can skip the landlord insurance. The reason for this is that landlord insurance is typically saved for the landlord's home and everything that is inside the home, including the tenants.

But, instead of protecting the tenants, homeowners insurance protects the homeowner. Thus, it should suffice for renting our a room in your home.

Short-Term Rentals

If you are renting out a property for a short amount of time, there are some things to consider. If you are going to be living out of the property all the time, then homeowners insurance will do just fine.

However, if you are renting out a remote property, you may want to consider some form of landlord insurance. You may also want to consider some sort of short-term insurance to make sure every situation is covered.

Renting the Entire Home

If you are completely moving out of the home and renting it out, a landlord insurance policy is a definite must.

This policy will make sure that the home's structure and any other structures on the property are covered. It also extends coverage to anything kept on the property that is used to maintain it. This protection is small, however, to the liability coverage that a landlord policy includes. This coverage pays for any legal fees, medical expenses, or court costs if an injury occurs.