If you own one or more properties that you rent out, you likely need rental property insurance.
Here’s what rental property insurance is, what it covers and whether or not you may need it.
What Is Rental Property Insurance?
Rental property insurance, also known as landlord insurance, covers risks associated with renting your property (home, apartment, condo, etc.) to others. It can provide financial protection in the event your property is damaged, or someone is injured on your property.
Depending on the policy you purchase, rental property insurance may also protect your rental property income if the property becomes uninhabitable due to a problem listed in your policy.
If you’re considering renting your property, it’s important to check to see what, if any, coverage is available from your existing homeowners insurance.
What Does Rental Property Insurance Cover?
Rental property insurance often includes the following coverage.
Dwelling coverage
This covers physical damage to the building caused by problems listed in your policy, like wind, fire and hail.
Liability coverage
Liability coverage protects you financially if you’re found legally liable for someone else’s medical bills or property damage related to the rental property. It will also cover your legal defense if you’re sued, up to the limits of your liability coverage.
Personal property
If you own items at the property for tenants to use, such as appliances or lawnmowers, they can be covered by a rental property insurance policy. Some insurance companies offer this as optional coverage.
Loss of rental income
If you are unable to rent your property for a period of time because of a loss caused by a problem listed in your policy, such as a fire, the lost rental income may be covered. This is also offered as optional coverage by some insurance companies.
What Does Rental Property Insurance Not Cover?
Certain expenses will not be covered by rental property insurance.
Tenant’s personal property
If your tenant’s personal property is damaged, it is not covered by rental property insurance. Tenants need their own renters insurance for coverage for their personal belongings.
Maintenance or equipment failure
Things sometimes break. But if the hot water heater in one of your rentals dies, you will likely have to pay out of pocket for repairs or for a replacement.
Shared property
Home sharing, such as renting out a spare bedroom or a floor in your house, is generally not covered under a rental property insurance policy. Rental property insurance is intended for properties that are not occupied by the owner.
Flood or earthquake damage
These disasters require their own, separate insurance policies.
If you live in an area prone to such natural disasters and are renting out your primary residence, you might already have a separate earthquake insurance or flood insurance policy for your home.
Rental Property Insurance Optional Coverage
Certain situations are not usually covered by rental property insurance, but you might be able to add them to your landlord insurance policy, such as:
Vandalism
If your property is intentionally damaged or vandalized, damages typically aren’t covered by a standard property insurance policy. Some insurers offer vandalism coverage as an add-on feature for purchase.
Burglary
Rental property insurance might cover the damage your property sustains in the event of a break-in, but it typically will not cover any stolen items. You might be able to add coverage for items used to maintain the property—such as a lawn mower or appliances—at an additional cost.
Property under construction
If your property is under construction, you may be able to purchase special coverage for the structure until it is ready for tenants.
Building codes
If you have to make repairs to a property, you might be required to make certain updates to comply with new building codes. You can sometimes purchase coverage to reimburse you for those situations.
Personal injury
This coverage can help if you are sued for wrongful eviction.
Do I Need Insurance on My Rental Property?
Insurance for short-term rentals
If you only rent your primary residence occasionally, you may not need rental property insurance.
For instance, perhaps you go on a few weekend vacations per year and rent your primary residence out during those times. In this case, your homeowners insurance policy might cover you in the event your home is damaged while you are away. That is because homeowners insurance sometimes covers short-term rentals.
Ask your homeowners insurance company if those rentals are covered, as every policy is different. You may need to add an insurance rider to ensure you have adequate coverage.
If you rent out your primary residence frequently, however, it’s generally considered a business and not covered by homeowners insurance.
In this case, look into home-sharing insurance.
Insurance for long-term rentals
If you rent your property for long periods of time, such as for several months or even years, you will probably need rental property insurance to protect yourself from potential financial losses.
How Much Does Rental Property Insurance Cost?
The Insurance Information Institute says that rental property insurance is about 25% more expensive than a standard homeowners insurance policy.
A recent Forbes Advisor analysis found that the average cost of homeowners insurance is $1,854 per year for $300,000 of dwelling coverage and $100,000 of liability coverage. This would make rental property insurance about $2,318 per year.
As is the case with any insurance product, the best way to find the cheapest rental property insurance is to shop around. Compare homeowners insurance quotes from multiple insurers before making your decision.
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